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Directors Report of Kirloskar Pneumatic Company Ltd.

Mar 31, 2022

Your Directors have pleasure in presenting this Report with Audited Annual Accounts of the Company for the year ended 31^st March, 2022.

1. COMPANY SPECIFIC INFORMATION

1.1. Financial Summary & Highlights

The financial results for the year ended 31^st March, 2022 are summarized below:		H in Million
	2021-22	2020-21
Total Income	10,334.97	8,333.80
Profit before tax	1,141.24	838.78
Tax Expense (Current & Deferred tax)	292.00	200.36
Profit after tax	849.24	638.42
Other Comprehensive Income / (Loss), net of tax	141.79	278.20
Total Comprehensive Income for the year	991.03	916.62
Transferred to General Reserve	500.00	700.00

Your Company earned a total income of H 10,334.97 Million for the financial year 2021-22, against H 8,333.80 Million of the previous year. Your Company earned a net profit of H 849.24 Million compared to H 638.42 Million earned in last year representing an increase over 33%.

1.2. Reserves

During the reporting year, H 500 Million has been transferred to the General Reserves of the Company.

1.3. Dividend

During the reporting year, the Board of Directors declared an interim dividend of H 1.60 (80%) per equity share of H 2/- each.

The Board of Directors has recommended a final dividend of H 2.40 (120%) per equity share of H 2/- each for the year 2021-22 which will be paid subject to the approval of shareholders in the ensuing Annual General Meeting.

The Company has paid / recommended total dividend of H 4.00 (200%) per equity share of H 2/- each for the year 2021-22.

The dividend distribution policy is available on the following Weblink:

https://www.kirloskarpneumatic.com/investors/for-

share-holders/company-policies

1.4. Major events that occurred during the year Refreshed Brand:

The Company has undertaken a refreshed âLimitlessâ vision which involves a refresh brand identity and colours considering the long legacy. The legacy has been an integral part of Indiaâs industrial revolution and through the âLimitlessâ mission, it will define the future. As a part

of the same, the values of Innovative thinking, Empathy, Collaboration, Integrity, Excellence and Value - creation will be deeply entrenched in the operations going forward.

Segment-wise position of business and its operations:

In terms of provisions of Indian Accounting Standards (âIND ASâ) 108 - Operating Segments, during the reporting year, the Chief Operating Decision Maker evaluates the Companyâs performance comprising various segments. Accordingly, segmental information has been reported under Compression Systems and other Non-Reportable Segments which include remaining non-qualifying segments.

Compression Systems registered a robust growth over the previous year by earning revenue of H 9,609 Million as compared to H 7,853 Million in the previous year.

During the reporting year, despite COVID impact on operations, your company continued to deliver compressors and compression systems for all critical areas - Oxygen plants, CNG stations, Petro-chemical plants, Pharma companies, Cold storage, etc. As India battles the second wave of COVID-19, a critical shortage of oxygen for treating patients with respiratory diseases has posed a major challenge. In an accelerated effort to expand access to oxygen care, we are pleased to inform you that the Company produced and supplied over 600 Screw Compressors for crucial Oxygen Generation Plants in India.

2. CAPITAL STRUCTURE

Increase in Share Capital

During the year, the Company allotted 178,000 equity shares of H 2/- each upon the exercise of the options granted to employees of the Company pursuant to KPCL Employee Stock Option Scheme 2019 (âKPCL

ESOS 2019â or âthe Schemeâ). Issued Capital, Subscribed Capital and Paid-up Capital of the Company therefore increased by H 356,000 and was H 128,890,580/-consisting of 64,445,290 equity shares of H 2/- each as on 31^st March, 2022.

Employee Stock Option Scheme

Your Company introduced KPCL ESOS 2019 in order to motivate, incentivize and reward its employees. Your Company views employee stock options as an instrument that would enable the employees to share the value they create for the Company and align individual objectives of the employees with the objectives of the Company.

The Nomination and Remuneration Committee at its meeting held on 22^nd October, 2019 and 29^th April, 2021 respectively approved the grant of 684,000 and 104,000 stock options exercisable into 684,000 and 104,000 Equity Shares of H 2/-each of the Company to its specified employees.

The Scheme is in compliance with the applicable provisions of the Companies Act, 2013 and the Rules issued thereunder, Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (âEmployee Benefit Regulationsâ) upto 12^th August, 2021, the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 w.e.f. 13^th August, 2021 and other applicable regulations, if any.

The disclosures as required under the Companies (Share Capital and Debentures) Rules, 2014 for the year 2021-22 is as under:
Options granted during the year	104,000
Options vested during the year	148,000
Options exercised during the year	178,000
The total number of shares arising as a result of exercise of option during the year	178,000
Options forfeited / lapsed / cancelled / expired during the year	49,500
The exercise price (in H) - For options granted during FY 2019-20	120/-
For options granted during FY 2021-22	190/-
Variation of terms of options during the year	No variation
Money realized by exercise of options during the year (In H)	21,360,000
Total number of options in force	477,900
During the year 2021-22, Employee wise details of options granted to :
1. Key Managerial Personnel: Mr K. Srinivasan, Managing Director	80,000
2. Any other employee who receives a grant of options in any one year of option amounting to five percent or more of options granted during the year 2021-22.	Nil
3. Identified employees who were granted option, during any one year, equal to or exceeding one percent of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant during the year 2021-22.	Nil

The certificate from M/s. SVD & Associates, Company Secretaries, Secretarial Auditors of the Company, confirming that the Scheme has been implemented in accordance with the aforesaid regulations and in accordance with the resolution passed by the Company at its Annual General Meeting held on 20^th July, 2019, will be placed before the shareholders at the ensuing Annual General Meeting. A copy of the same will be available for inspection at the Companyâs website and can be accessed on the following weblink :

https://www.kirloskarpneumatic.com/investors/for-

share-holders/agm-results

The disclosures relating to the implementation of the Scheme, details of options granted, changes to the Scheme, if any, etc. are placed on the website of the Company as required under the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 and can be accessed on the following weblink :

https://www.kirloskarpneumatic.com/investors/

emplovee-stock-option-plan

In line with the IND AS 102 on ''Share Based Payments'' issued by the Institute of Chartered Accountants of India (âICAIâ), your Company has computed the cost of equity -settled transactions by using the fair value of the options at the date of the grant and recognized the same as employee compensation cost over the vesting period.

3. AWARDS

During the reporting year, your Company was recognized with prestigious and diverse external accolades which include:

â¢ âPrize for Leadership in HR Excellence - 2021â in 12^thCII HR Excellence Assessment 2021.

Awards in the 35^th National Convention on Quality Concepts NCQC - 2021 organized by QCFI:

â¢ 2 âPar Excellence Award Trophyâ

â¢ 1 âDistinguish Award Trophyâ

Awards in the 36^th Annual Chapter Convention on Quality Concepts CCQC - 2021 organized by QCFI:

â¢ 3 âGold Trophyâ

â¢ 2 âSilver Trophyâ

Award in Special Program of Experience sharing on âQuality / Productivity Improvement Success Storyâ organised by QCFI-Pune:

â¢ 1 âGold Trophyâ

4. PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS

No Loans, Guarantees covered under the provisions of Section 186 of the Companies Act, 2013 are given / provided / made during the reporting year. However, a

Letter of Comfort provided to State Bank of Mauritius (SBM) with respect to Kirloskar Management Services Private Limited to the tune of H 100 Million.

During the reporting year, the Company has not made any investment except investments in Mutual Funds.

5. INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

Details of the transfer/s to the IEPF made during the year as mentioned below:

During the reporting year, your Company transferred following amount and shares to the Investor Education and Protection Fund :

Final Dividend for the year 2013-14	2,148,690
No. of shares of H 2/- each	77,255

Year wise amount of unpaid / unclaimed dividend lying in the unpaid account up to the year and the corresponding shares, which are liable to be transferred to the IEPF and the due dates for such transfer:

Sr. No.	Year	Unpaid / Unclaimed Dividend as on 31-03-2022	Corresponding Number of Equity Shares of the Company	Due Date of Transfer
1	Final Dividend 2014-15	1,223,100.00	244,620*	3^rd September, 2022
2	Dividend 2015-16 (Interim)	1,635,291.00	233,613*	19^th April, 2023
3	Dividend 2015-16 (Interim - PHL)	1,400,931.00	155,659#	6^th May, 2023
4	Dividend 2016-17 (Interim - PHL)	1,207,380.00	160,984#	3^rd May, 2024
5	Final Dividend 2016-17	4,241,490.00	424,149*	1^st September, 2024
6	Final Dividend 2017-18	3,824,748.00	318,729*	29^th August, 2025
7	Dividend 2018-19 (Interim)	1,596,941.00	1,596,941**	28^th February, 2026
8	Final Dividend 2018-19	2,352,283.50	1,568,189**	25^th August, 2026
9	Dividend 2019-20 (Interim)	1,639,340.00	1,639,340**	28^th February, 2027
10	Dividend 2019-20 (Second Interim)	2,982,886.30	1,754,639**	9^th April, 2027
11	Final Dividend 2020-21	4,836,428.00	1,381,837**	25^th August, 2028
12	Dividend 2021-22 (Interim)	2,038,349.40	1,273,968**	5^th March, 2029
Note : #The Sr No. 3 & 4 states the amount of dividend declared & paid and corresponding no of shares thereto of erstwhile Pneumatic Holdings Limited, which was merged into the Company w.e.f. 28^th April, 2017 by virtue of the order of the Hon''ble National Company Law Tribunal, Mumbai. * Before sub-division, Equity Share having face value of H 10/- each ** After sub-division, Equity Share having face value of H 2/- each

6. DIRECTORS

i. Directors and Key Managerial Personnel

During the year, your Company appointed Mr K. Srinivasan as a Whole-time Director designated as Executive Director for the period from 27^th October, 2020 to 1^st January, 2021 and Managing Director w.e.f. 2^nd January, 2021 to 26^thOctober, 2023.

Mr Rahul C. Kirloskar was re-appointed as Whole-time Director designated as Executive Chairman for a further period of 5 (Five) years w.e.f. 23^rd January, 2022.

Mr Mahesh Chhabria was appointed as a non-executive Director w.e.f. 3^rd March, 2021.

Your Company also appointed Mr Tejas Deshpande as an Independent Director with effect from 27^th October, 2020 to hold office for a term of 5 (Five) consecutive years upto 26^th October, 2025. Further, Dr Ajay Dua was re-appointed, by way of special resolution, as an Independent Director with effect from 22^nd July, 2021 to hold office for a term of 5 (Five) consecutive years upto 21^st July, 2026.

The Board of Directors is of the opinion that the above Independent Director holds the highest standards of integrity and possess necessary expertise and experience including proficiency in the field in which your Company operates.

Mr D. R. Swar, Director liable to retire by rotation at the ensuing Annual General Meeting does not offer himself for re-appointment.

Mr Atul C. Kirloskar, Director retires by rotation at the ensuing Annual General Meeting and being eligible offers himself for re-appointment. The necessary resolution for appointment of Mr Atul C. Kirloskar is proposed for approval in the forthcoming Annual General Meeting.

ii. Declaration from Independent Directors and Statement on Compliance of Code of Conduct

Your Company has received necessary declarations from all its Independent Directors stating that they meet the criteria of independence as provided in Sub-section (6) of Section 149 of the Companies Act, 2013 and Regulation 16 (1) (b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The Independent Directors have complied with the code for Independent Directors prescribed in Schedule IV to the Companies Act, 2013.

All the Directors and Senior Management Personnel have also complied with the Code of Conduct of the Company as required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 for its Directors and Senior Management.

iii. Directors Appointment and Remuneration Policy

The Board, on the recommendation of the Nomination and Remuneration Committee, adopted a policy for selection and appointment of Directors, Key Managerial Personnel (KMP) and Senior Management Personnel. Policy also prescribes the guidelines for determining the remuneration of Executive Directors, Non-Executive Directors, KMP and Senior Management.

The Remuneration Policy is available on the Company''s website on the following weblink :

https://www.kirloskarpneumatic.com/investors/for-

share-holders/company-policies

iv. Board Evaluation

The annual evaluation framework for assessing the performance of Directors comprises of the following key areas :

a) Attendance in the meetings, participation and independence during the meetings;

b) Interaction with Management;

c) Role and accountability of the Board;

d) Knowledge and proficiency; and

e) Strategic perspectives or inputs.

The evaluation involves assessment by the Nomination and Remuneration Committee and Board of Directors. A member of the Nomination and Remuneration Committee and Board does not participate in the discussion of his / her evaluation.

Pursuant to the provisions of the Companies Act, 2013 and Regulation 17 (10) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board has carried out performance evaluation of its own performance and that of its committees and individual Directors.

v. Number of Meetings of the Board

A calendar of meetings is prepared and circulated in advance to the Directors. During the year, seven Board Meetings were convened and held, the details of which are given in the Report on Corporate Governance. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

vi. Composition of Committee Meetings

The composition of the Audit Committee, Nomination and Remuneration Committee, Stakeholders'' Relationship Committee and Risk Management Committee constituted by the Board under the Companies Act, 2013 and SEBI (LODR) Regulations, 2015 as well as changes in the composition, if any and no. of meetings held during the year forms part of the Report on Corporate Governance.

vii. Directorsâ Responsibility Statement

To the best of their knowledge and belief and according to the information and explanation obtained by them, the Directors in terms of clause (c) of Sub-section (3) of Section 134 state that:

a) In the preparation of the annual accounts, the applicable Indian Accounting Standards (IND AS) have been followed and there have been no material departures;

b) Accounting policies as mentioned in the financial statements have been selected and applied consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at 31^st March, 2022 and of the profit of the company for the year ended on that date;

c) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the company and for prevention and detection of fraud and other irregularities;

d) The annual accounts have been prepared on a going concern basis;

e) Proper internal financial controls have been laid down for the company and that such internal financial controls are adequate and are operating effectively; and

f) Proper systems to ensure compliance with the provisions of all applicable laws are in place and that such systems are adequate and operating effectively.

7. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All related party transactions which were entered into during the financial year were on an arm''s length basis and in the ordinary course of business. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large.

The statement that the transactions are at arm''s length and in the ordinary course of business is supported by a certificate from the Managing Director. The Company has also obtained the certificate from a Chartered Accountant on periodical basis.

All Related Party Transactions have been placed before the Audit Committee for their approval and to the Board, as and when required.

In certain cases, prior omnibus approval of the Audit Committee is obtained on a yearly basis. The transactions entered into pursuant to the omnibus approval so granted are reviewed by the Audit Committee on a quarterly basis.

The amended policy on Related Party Transactions as approved by the Board is uploaded on the Company''s website.

The disclosures as per IND AS for transactions with related parties are provided in the Financial Statement of the Company.

8. RISK MANAGEMENT

During the reporting year, the provisions related to the Risk Management Committee of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 were made applicable to the Company. The Company has in place a Risk Management Committee of the Board, details of which form part of the Corporate Governance Report.

The Company has a Risk Management framework to identify, evaluate business risks and opportunities. To strengthen the risk management framework, Company has Segment Level Risk Committees, Corporate Risk Management Committee and Board level Risk Management Committee. This framework seeks to minimize adverse impact on the business objectives and enhance the Company''s competitive advantage.

During the reporting year, the Board of Directors has amended the Risk Management Policy in line with the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended.

9. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an Internal Control System commensurate with the size, scale and complexity of its operations. The scope of the Internal Audit is decided by the Audit Committee and the Board. To maintain its objectivity and independence, the Board has appointed an external Auditor, which reports to the Audit Committee of the Board on a periodic basis.

The Internal Auditor monitors and evaluates the efficacy and adequacy of internal control systems in the Company, its compliance with operating systems, accounting procedures and policies for various functions of the Company. Based on the report of Internal Auditor, process owners undertake corrective action wherever required in their respective areas and thereby strengthen the controls further. Audit observations and actions taken thereof are presented to the Audit Committee of the Board on periodic basis.

During the reporting year, Internal Financial Controls laid down by the Board were tested for adequacy & effectiveness and no reportable material weakness in the design or operations was observed. The Company has policies and procedures in place for ensuring proper and efficient conduct of its business, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records and timely preparation of reliable financial information. Statutory Auditors have also given unmodified audit opinion on adequacy of internal financial control systems with reference to financial statements.

10. AUDITORS

a) Statutory Auditors

The Auditors of the Company, P G Bhagwat LLP (Formerly M/s P G Bhagwat), Firm Registration No. 101118W/ W100682, Chartered Accountants, Pune, were appointed as Statutory Auditors for a period of five years from 41^stAnnual General Meeting. Accordingly, the term of P G Bhagwat LLP as Statutory Auditors completed at the conclusion of 46^th Annual General Meeting in terms of the said approval and Section 139 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014.

The Members of the Company appointed Kirtane & Pandit LLP, Firm Registration No. 105215W/W100057, Chartered Accountants as the Statutory Auditors of the Company for a term of 5 (Five) consecutive years from the conclusion of the 46^th Annual General Meeting till the conclusion of the 51^st Annual General Meeting of the Company.

There are no qualifications, reservations or adverse remarks or disclaimers made by the Statutory Auditors in their Audit Report for the year ended 31^st March, 2022.

b) Cost Auditors

The Board of Directors had, on the recommendation of the Audit Committee, appointed M/s Sudhir Govind Jog, a proprietary firm to audit the cost accounts of the Company for the financial year 2022-23 on a remuneration of H 0.6 Million.

As required under the Companies Act, 2013, the remuneration payable to the cost auditor is required to be placed before the Members in a general meeting for their ratification. Accordingly, a resolution seeking Members'' ratification for the remuneration payable to M/s Sudhir Govind Jog, a proprietary firm as Cost Accountant for the year ended on 31^st March, 2023 is proposed for approval in the forthcoming Annual General Meeting.

c) Secretarial Auditors

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s SVD & Associates, a partnership firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The report of the Secretarial Audit is annexed herewith as Annexure â1â.

There are no qualifications, reservations or adverse remarks or disclaimer made by the Secretarial Auditors in their Secretarial Audit Report for the year ended 31^st March, 2022.

M/s SVD & Associates, a partnership firm of Company Secretaries has submitted Annual Secretarial Compliance Report as laid down in SEBI Circular CIR/ CFD/CMD1/27/2019 dated 8^th February, 2019 and has also confirmed that the Company has complied with all applicable SEBI Regulations and circulars / guidelines issued thereunder, for the financial year 2021-22.

11. SECRETARIAL STANDARDS

The Institute of Company Secretaries of India had revised the Secretarial Standards on Meetings of the Board of Directors (SS-1) and Secretarial Standards on General Meetings (SS-2) with effect from 1^st October, 2017. The Company is in compliance with the revised Secretarial Standards.

12. REPORTING OF FRAUDS BY AUDITORS

During the reporting year, neither the Statutory Auditors nor the Secretarial Auditors has reported to the Audit Committee, under Section 143 (12) of the Companies Act, 2013, any instance of fraud committed against the Company by its officers or employees. Therefore no details are required to be provided in the Boardâs report.

13. CORPORATE GOVERNANCE

The Company strives to maximize the wealth of the shareholders by managing the affairs of the Company

with pre-eminent level of accountability, transparency and integrity. A report on Corporate Governance including the relevant Auditors'' Certificate regarding compliance with the conditions of Corporate Governance as stipulated in Regulation 34 (3) read with Part E of Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed and forms part of the Annual Report.

State of Companyâs affairs and future outlook is provided in the Management Discussion and Analysis Report, annexed hereto forming part of Directorsâ Report.

14. ANNUAL RETURN

The Annual Return as provided under Sub-section (3) of Section 92 of the Companies Act, 2013 is available on the following web-link:

https://www.kirloskarpneumatic.com/investors/for-

share-holders/agm-results

15. CORPORATE SOCIAL INITIATIVES

The Board has established a CSR Committee to monitor its CSR activities. On the recommendation of the CSR Committee, the Board of Directors has adopted a CSR Policy in line with the Companies Act, 2013.

As part of its initiatives under Corporate Social Responsibility (CSR), your Company has undertaken projects in the areas of Promoting Education, Education of Girls, Environment and Health. These projects are largely in accordance with Schedule VII of the Companies Act, 2013. During the reporting year, the scope of some of the projects as stated in the CSR Policy was expanded to accommodate the needs and expectations of the relevant stakeholders due to COVID-19 Pandemic.

This year of COVID-19 Pandemic was characterised by challenges related to the second and third waves and restrictions imposed during those periods for everyone including our CSR beneficiaries. Your Company was a major contributor to âMission Vayuâ project of MCCIAâs Pune Platform for Covid Response in which Oxygen Concentrators and BiPAP Ventilators were supplied to hospitals during the second wave of COVID-19 pandemic. COVID-19 related supports like grocery kits, health checkups, masks, sanitizers, etc. were continued to be provided to people living with HIV and their families through DISHA Initiative.

The education related CSR initiatives (Bharari and KaShi) were focused on supporting girl education by facilitating eLearning by way of distributing tablets, enhancing eLearning facility in a school and conducting online classes, etc.

Your Company is participating in Ramnadi Restoration Mission of Kirloskar Vasundhara Initiative by way of supporting RRM School Project in which various activities

for children from 20 schools in the vicinity of Ramnadi River are being implemented.

The details on CSR activities are provided in Management Discussion and Analysis Report.

The CSR policy is available on the website of the Company. CSR Policy in brief:

The focus of CSR activities will be on Education, Environment and Health.

While devising projects, care would be taken to promote education, health and sanitation, protect the environment and minimize adverse impact, if any, on the society at large.

The Company shall spend at least 2% (Two percent) of the average net profits, calculated in accordance with the provisions of the Companies Act, 2013 and Rules thereunder, made by it in three immediately preceding financial years, in every financial year.

The Annual Report on CSR Activities is annexed herewith as Annexure â2â.

16. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, is annexed herewith as Annexure â3â.

17. BUSINESS RESPONSIBILITY REPORT

Business Responsibility Report as required under Regulation 34(2)(f) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended, forms part of this Annual Report.

18. MATERIAL CHANGES AND COMMITMENTS, BETWEEN THE DATE OF BALANCE SHEET AND THE DATE OF REPORT

There have been no material changes and commitments, affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the Financial Statements relate and the date of this Report.

19. MAINTENANCE OF COST RECORDS

Your Company confirms that the maintenance of cost records as specified by the Central Government under Sub-section (1) of Section 148 of the Companies Act, 2013, is required by the Company and accordingly such accounts and records are made and maintained.

20. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations.

21. VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Company has established a vigil mechanism for Directors and Employees to report their genuine concerns, details of which have been given in the Report on Corporate Governance.

22. FIXED DEPOSIT

Your Company has discontinued accepting fixed deposits since 2001-02. As such, as of 31^st March, 2022 there are no fixed deposits outstanding.

23. PARTICULARS OF EMPLOYEES

Disclosures with respect to the remuneration of Directors and Employees as required under Section 197 (12) of the Companies Act, 2013 read with Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 have been annexed as Annexure â4â to this Report.

In accordance with the provisions of Section 197 (12) of the Companies Act, 2013 and Rule 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names and other particulars of Employees are available at the Registered Office of the Company during working hours for a period of 21 days before the Annual General Meeting and shall be made available to any shareholder on request.

24. DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

Your Company has formulated ''Prevention of Sexual Harassment of Women at Workplace Policy'' and the highlights are communicated to all Employees and also displayed across all its locations as well as on its intranet.

Your Company has complied with provisions relating to constitution of Internal Committee (IC) under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. IC meets every quarter and submits the minutes of meeting to the employer i.e. Managing Director. During the reporting year, four such meetings were conducted and no complaint has been received.

During the reporting year, to create ongoing awareness, your Company has :

â¢ Continued with a PoSH Awareness Module in its employee induction program.

â¢ Conducted eleven workshops (in induction programs) for 133 new employees.

In addition to the above, as a social responsibility, your Company has also extended awareness sessions for 227 employees and 47 students of the other entities through 11 workshops.

25. EMPLOYEES

Your Company has taken several initiatives for Human Resource Development and manpower retention. Manpower is classified under Frontend, Internal and Support functions for better Customer Reach and Support. Assessment of performance through a robust and interactive PMS procedure, identifying Learning needs through the 70-20-10 format, Career Counselling and Skill Development Programs are some of the initiatives adopted by your Company. Training programs are designed to enhance skills, knowledge and behaviour. Employees are motivated through empowerment and rewarded for good performance. Adoption of 5S across the Company has led to a clean and healthy environment. Your Company has achieved an India benchmark employee engagement score of 85 in the engagement survey 2019 conducted by an external Independent Agency. In the FY-22 your Company conducted an internal survey and the engagement levels were unmoved and your Company have benchmark score of 84 within Kirloskar Group. CII conferred us with the "Prize for Leadership in HR Excellence-2021". Your

Company has won this for the 3^rd consecutive year. Your Company is also one out of the two organizations who have achieved this consistency in the Country.

Your Company has 733 permanent employees on its rolls as on 31^st March, 2022.

26. ACKNOWLEDGEMENT

The outbreak of the COVID-19 pandemic resulted into loss of several lives in India and abroad. Various stakeholders have lost their colleagues, close relatives and acquaintances. The Directors regret this loss and are deeply grateful to and have immense respect for every stakeholder who risked his / her life in fighting this pandemic.

The Directors wish to convey their appreciation to all employees for their individual efforts and collective contribution to your Company''s performance under difficult and challenging conditions. The Directors would also like to thank the shareholders, customers, dealers, suppliers, bankers and all other stakeholders for their continued support and confidence in the management of the Company.

For and on behalf of the Board of Directors

sd/-

Rahul C Kirloskar

Place : Pune Executive Chairman

Date : 28^th April, 2022 DIN 00007319

Mar 31, 2019

The Directors have pleasure in presenting this Report with Audited Annual Accounts of the Company for the year ended 31^st March, 2019.

1. COMPANY SPECIFIC INFORMATION

1.1. Financial Summary & Highlights

The financial results for the year ended 31^st March, 2019 are summarized below:

Amount in Million

	2018-19	2017-18
Total Income	7,247.50	6,227.75
Profit before tax	802.29	726.81
Tax Expense (Current & Deferred tax)	249.67	227.38
Profit after tax	552.62	499.43
Other Comprehensive Income / (Loss)	33.00	38.27
Total Comprehensive Income for the year, net of tax	585.62	537.70
Transferred to General Reserve	300.00	324.71

Your Company achieved total revenue of Rs 7,247.50 Million for the financial year 2018-19, against last yearâs Rs 6,227.75 Million an increase of 16%. Your company earned a net profit of Rs 552.62 Million, against last yearâs Rs 499.43 Million an increase of 11%.

1.2. Reserves

During the reporting year, Rs 300 Million has been transferred to the General Reserves of the Company.

1.3. Dividend

During the reporting year, the Board of Directors has declared an interim dividend of Re. 1 (50%) per equity share of Rs 2/- each and has paid Rs 13.20 Million dividend distribution tax thereon.

The Board of Directors has recommended a final divided of Rs 1.50 (75%) per equity share of Rs 2/- each and which will be paid subject to approval of Shareholders in the ensuing Annual General Meeting. The Dividend Distribution Tax payable on the final dividend would be Rs 19.80 Million.

The Company has paid / recommended total dividend of Rs 2.50 (125%) per equity share of Rs 2/- each for the year 2018-19.

1.4. Major events that occurred during the year

Segment-wise position of business and its operations

Your Company achieved revenue for the Compression Product Segment of Rs 6,614 Million for the financial year 2018-19, against last yearâs Rs 5,639 Million an increase of 17% and revenue for the Transmission Product Segment of Rs 473 Million for the financial year 2018-19, against last yearâs Rs 413 Million an increase of around 15%.

Commencement of commercial operations of RoadRailer Train

During the reporting year, your Company successfully commenced operations by undertaking commercial runs of RoadRailer train from both Chennai and Delhi Divisions of Indian Railways, covering a distance of over 2,150 kilometers each time the RoadRailer train traveled from Melpakkam, Tamil Nadu to Palwal, Haryana and back.

Joint Venture

During the reporting year, your company subscribed to 1,60,000 equity shares of Rs. 10/- each of Kirloskar AECOM Private Limited (hereinafter referred to as âKAPLâ), a Joint Venture Company, formed for carrying out business of Air Quality Control Systems (AQCS).

Subsequently, AECOM India Private Limited informed the Company about its decision to exit from KAPL and accordingly, sold its entire shareholding of 1,60,000 equity shares of Rs 10/- each in the Joint Venture Company in December, 2018.

Consequently, the name of the KAPL has been changed from âKirloskar AECOM Private Limitedâ to âSOX Control Solutions Private Limitedâ as on 24^th December, 2018. Your Company also sold its entire shareholding of 1,60,000 equity shares of Rs 10/- each in the SOX Control Solutions Private Limited on 22^nd January, 2019.

As a result of this, SOX Control Solutions Private Limited (Formerly Kirloskar AECOM Private Limited) has ceased to be Joint Venture Company. No commercial operations were carried out during the year.

2. CAPITAL STRUCTURE

Sub-division of Shares

Your Company had sub-divided one equity share of face value of Rs 10/- per share, fully paid up, into five equity shares of face value of Rs 2/- per share, fully paid-up with effect from 27^th September, 2018. Upon the sub-division of equity shares, your Company had credited corresponding new equity shares of Rs 2/- each in lieu of original equity shares of Rs 10/- each into the demat account of the respective shareholders who hold shares in electronic form and sent share certificates to those shareholders who hold shares in physical mode. Consequently, though there is no change in the amount of share capital of the company, the number of equity shares has been increased in proportion from Rs 10/- each to Rs 2/- each.

3. AWARDS

During the reporting year, your Company has received:

Awards in the 32^nd National Convention on Quality Concepts NCQC - 2018 organized by QCFI

- 2 âExcellence Award Trophyâ

Awards in the 33^rd Annual Chapter Convention on Quality Concepts CCQC - 2018 organized by QCFI

- 2 âGold Trophyâ

- 1 âSilver Trophyâ

Awards in the 14^th Kaizen Competition- Maharashtra State Level 2018 organised by CII

- 1 âThird Prizeâ

4. PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS

No Loans, Guarantees covered under the provisions of Section 186 of the Companies Act, 2013 are given / provided / made during the reporting year.

During the reporting year, the Company has not made any investment except investment in Mutual Funds and investment in KAPL as mentioned above.

5. INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

Details of the transfer/s to the IEPF made during the year are as mentioned below:

During the reporting year, your Company transferred following amounts to the Investor Education and Protection Fund:

Particulars	Amount of unclaimed dividend / unpaid dividend (Rs)	Corresponding shares of Rs 2/- each
Final Dividend for the year 2010-11	1,390,116	579,215

Year wise amount of unpaid/unclaimed dividend lying in the unpaid account up to the Year and the corresponding shares, which are liable to be transferred to the IEPF and the due dates for such transfer:

Sr. No.	Year	Amount to be Transferred as on 31^st March, 2019	Corresponding Number of Equity Shares of the Company	Date of Transfer
1	Final Dividend 2011-12	2,548,692	212,391	21^st August, 2019
2	Final Dividend 2012-13	2,556,972	213,081	27^th August, 2020
3	Final Dividend 2013-14	2,188,010	218,801	27^th August, 2021
4	Final Dividend 2014-15	1,236,765	247,353	3^rd September, 2022
5	Dividend 2015-16 (Interim)	1,660,855	237,265	19^th April, 2023
6	Final Dividend 2016-17	4,430,970	443,097	1^st September, 2024
7	Final Dividend 2017-18	4,019,568	334,964	29^th August, 2025
8	Dividend 2018-19 (Interim)	1,718,230	1,718,230	28^th February, 2026

6. DIRECTORS

i. Changes in Composition of the Board of Directors

During the reporting year,

- Mrs Nalini Venkatesh was appointed as an Additional and Independent Director of the Company with effect from 25^th July, 2018 subject to approval of Members. The Members of the Company have appointed her as an Independent Director with effect from 25^th July, 2018 by way of postal ballot.

- Dr Aditi Pant ceased to be an Independent Director of the Company with effect from 29^th July, 2018 on account of retirement.

- The Members of the Company have approved the continuation of appointment of Mr D R Swar as Non-Executive Director even after he attains the age of 75 years till the expiry of his current term by way of postal ballot.

Mr Atul C Kirloskar, Director retires by rotation at the ensuing Annual General Meeting and being eligible offers himself for re-appointment.

Mr Sunil Shah Singh and Mr G Krishna Rao have been appointed as Independent Directors on the Board for five consecutive years for a term upto 22^nd July, 2019. The Company has received notices in writing proposing their candidature for the office of Director. Details of the proposal including rationale for appointment of Mr Sunil Shah Singh and Mr G Krishna Rao as Independent Directors are mentioned in the Explanatory Statement under Section 102 of the Companies Act, 2013 of the Notice of the 44^th Annual General Meeting.

Mr Aditya Kowshik, Managing Director has been appointed as Managing Director upto 23^rd October, 2019. He is further appointed as Managing Director from 24^th October, 2019 upto 1^st January, 2021 subject to approval of Members in the ensuing Annual General Meeting. The Company has received notice in writing proposing his candidature for the office of Director. Details of proposal for appointment of Mr Aditya Kowshik are mentioned in the Explanatory Statement under Section 102 of the Companies Act, 2013 of the Notice of the 44^th Annual General Meeting.

The necessary resolutions for appointment of Mr Atul C Kirloskar, Mr Sunil Shah Singh, Mr G Krishna Rao and Mr Aditya Kowshik are being placed before you.

ii. Changes in KMP

During the year under review, there was no change in the Key Managerial Personnel.

iii. Declaration from Independent Directors and Statement on Compliance of Code of Conduct

The Independent Directors have complied with the code for Independent Directors prescribed in Schedule IV to the Companies Act, 2013.

The Directors and senior management personnel have complied with the Code of Conduct for Directors and Senior Management.

iv. Directors Appointment and Remuneration Policy

The Board has on the recommendation of the Nomination and Remuneration Committee adopted a policy for selection and appointment of Directors, Key Managerial Personnel (KMP) and Senior Management Personnel and their remuneration. This Policy consists of the guidelines for appointment of Directors, KMP and Senior Management Personnel, guidelines for determining the remuneration of Executive Directors, Non-Executive Directors, KMP and Senior Management and Directors and Officers Liability Insurance.

The Remuneration Policy is available on the website of the Company, viz. www.kirloskarkpcl.com

v. Board Evaluation

The annual evaluation framework for assessing the performance of Directors comprises the following key areas:

a) Attendance in the meetings, participation and independence during the meetings.

b) Interaction with Management.

c) Role and accountability of the Board.

d) Knowledge and proficiency.

e) Strategic perspectives or inputs.

vi. Number of Meetings of the Board

A calendar of meetings is prepared and circulated in advance to the Directors. During the year, five Board Meetings were convened and held, the details of which are given in the Report on Corporate Governance. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

vii. Composition of Committee Meetings

The composition of the Audit Committee, Nomination and Remuneration Committee & Stakeholders Relationship Committee constituted by the Board under the Companies Act and Listing Regulations as well as changes in the composition, if any and no. of meetings held during the year forms part of the Report on Corporate Governance.

viii. Directorsâ Responsibility Statement

To the best of their knowledge and belief and according to the information and explanation obtained by them, the Directors in terms of clause (c) of Sub-section (3) of Section 134 state that:

a) In the preparation of the annual accounts, the applicable Indian Accounting Standards (IND AS) have been followed and there have been no material departures;

b) Accounting policies as mentioned in the financial statements have been selected and applied consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at 31^st March, 2019 and of the profit of the company for the year ended on that date;

d) The annual accounts have been prepared on a going concern basis;

e) Proper internal financial controls have been laid down for the company and that such internal financial controls are adequate and are operating effectively; and

f) Proper systems to ensure compliance with the provisions of all applicable laws are in place and that such systems are adequate and operating effectively.

6. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All related party transactions which were entered into during the financial year were on an armâs length basis and in the ordinary course of business. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large.

The statement that the transactions are at armâs length and in the ordinary course of business is supported by a certificate from the Managing Director. The Company has also obtained the certificate from a Chartered Accountant on periodical basis.

All Related Party Transactions have been placed before the Audit Committee for their approval and to the Board, as and when required.

The policy on Related Party Transactions as approved by the Board is uploaded on the Companyâs website.

The disclosures as per Indian Accounting Standards (IND AS) for transactions with related parties are provided in the Financial Statement of the Company.

7. RISK MANAGEMENT

The provisions related to the Risk Management Committee of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 are not applicable to the Company.

During the reporting year, the Company has constituted board level Risk Management Committee.

Thus, the Company has a Risk Management Committee of Board, Corporate Risk Management Committee and Segment Level Risk Committees.

The Company has a Risk Management framework to identify, evaluate business risks and opportunities. To strengthen the risk management framework, Company has Segment Level Risk Committees, Corporate Risk Management Committee and Board Level Risk Management Committee. This framework seeks to minimize adverse impact on the business objectives and enhance the Companyâs competitive advantage.

8. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

During the reporting year, Internal Financial Controls laid down by the Board were tested for adequacy & effectiveness and no reportable material weakness in the design or operations were observed. The Company has policies and procedures in place for ensuring proper and efficient conduct of its business, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records and timely preparation of reliable financial information. Statutory Auditors have also certified adequacy of internal financial controls system over financial reporting.

9. AUDITORS

a. Statutory Auditors

The Auditors of the Company, M/s P G Bhagwat, Firm Registration No. 101118W, Chartered Accountants, Pune, were appointed for a period of five years in 41^st Annual General Meeting.

There are no qualifications, reservations or adverse remarks or disclaimer made by the Statutory Auditors in their Audit Report for the year ended 31^st March, 2019.

b. Cost Auditors

The Board of Directors had, on the recommendation of the Audit Committee, appointed M/s Sudhir Govind Jog, a proprietary firm of Cost Accountant to audit the cost accounts of the Company for the financial year 2019-20 on a remuneration of Rs 0.6 Million.

As required under the Companies Act, 2013, the remuneration payable to the cost auditor is required to be placed before the Members in a general meeting for their ratification. Accordingly, a resolution seeking Membersâ ratification for the remuneration payable to M/s Sudhir Govind Jog, a proprietary firm of Cost Accountant for the year ended on 31^st March, 2020 is included at Item No. 4 of the Notice convening the 44^th Annual General Meeting.

c. Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s SVD & Associates, a partnership firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit is annexed herewith as Annexure â1â.

There are no qualifications, reservations or adverse remarks or disclaimer made by the Secretarial Auditors in their Secretarial Audit Report for the year ended 31^st March, 2019.

M/s SVD & Associates, a partnership firm of Company Secretaries has also submitted Annual Secretarial Compliance Report as laid down in SEBI Circular CIR/CFD/CMD1/27/2019 dated 8^th February, 2019 and has also confirmed that the Company has complied with all applicable SEBI Regulations and circulars / guidelines issued thereunder, for the Financial Year 2018-19.

10. SECRETARIAL STANDARDS

11. REPORTING OF FRAUDS BY AUDITORS

During the reporting year, neither the statutory auditors nor the secretarial auditor has reported to the audit committee, under Section 143 (12) of the Companies Act, 2013, any instances of fraud committed against the Company by its officers or employees, the details of which would need to be mentioned in the Boardâs report.

12. CORPORATE GOVERNANCE

The Company endeavors to maximize the wealth of the shareholders by managing the affairs of the Company with pre-eminent level of accountability, transparency and integrity. A report on Corporate Governance including the relevant Auditorsâ Certificate regarding compliance with the conditions of Corporate Governance as stipulated in Regulation 34 (3) read with Part E of Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 along with Management Discussion and Analysis is annexed and forms part of the Annual Report. Discussion on state of Companyâs affairs has been covered in the Management Discussion and Analysis Report.

13. EXTRACT OF ANNUAL RETURN

The extract of Annual Return as provided under Sub-section (3) of Section 92 of the Companies Act, 2013 is available on the website of the Company namely www.kirloskarkpcl.com

14. CORPORATE SOCIAL INITIATIVES

As part of its initiatives under Corporate Social Responsibility (CSR), the Company has undertaken projects in the areas of Promoting Education, Education of Girls, Environment, Health and Sanitation. These projects are largely in accordance with Schedule VII of the Companies Act, 2013.

Your Company has contributed an amount of Rs 6 Million by way of donation to the Corpus Fund of Kirloskar Institute of Advanced Management and Studies for promoting education.

Sanitation, which is a national agenda, your Company has taken the initiative to create awareness about WaSH (water, sanitation and hygiene) among 27,500 students from schools in the vicinity of Hadapsar, Saswad and Nasik Plant by deploying 140 employee volunteers and training these volunteers to implement various WaSH modules throughout the academic year.

Kirloskar Vasundhara Film Festivals on the theme of âNO to Plastic, YES to Earthâ were organized by your Company through âKirloskar Vasundhara Clubâ of employee volunteers in schools and colleges in the vicinity of Hadapsar and Saswad Plant during this year, creating awareness about plastic pollution for 12,500 students.

To create awareness about HIV AIDS amongst different sections of the society your Companyâs DISHA project reached out to 49,750 members of the general community including secondary school and junior college students.

Your Company has carried out preventive health checkup of 17,500 school students from schools and colleges in the vicinity of Hadapsar and Saswad Plant.

200 socio-economically challenged students, majority being girls from schools in the vicinity of Hadapsar and Saswad Plant are supported and developed from 5^th to 10^th Std. through Bharari initiative. After 10^th Std. these students are supported for continued education by way of Swabhiman Scholarship.

Your Company is supporting Education of 30 girls by supporting daughters of workmen of Cold Storage Units from UP, Gujarat, Rajasthan and MP. This unique CSR Initiative, named KaShi, is implemented by employee Volunteers from its North and West Regional Offices in collaboration with respective State Cold Storage Associations.

CSR Policy in brief:

The focus of CSR activities will be on Education, Environment and Health.

While devising projects, care should be taken to promote education, health and sanitation, protect the environment and minimize adverse impact, if any, on the society at large.

The Company is committed to uphold the interests of all the stakeholders by implementing the various guidelines like business excellence models.

The Company shall spend at least 2% (two percent) of the average net profits, calculated in accordance with the provisions of the Companies Act, 2013 and Rules thereunder, made by it in three immediately preceding financial years, in every financial year.

Any income or surplus arising out of CSR activities undertaken by the Company will form part of the corpus earmarked for CSR activities.

Any surplus arising out of any of the CSR activities carried out by the Company will not be treated as part of the business profits of the Company.

The Annual Report on CSR Activities is annexed herewith as Annexure â2â.

15. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134 (3) (m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, is annexed herewith as Annexure â3â.

16. MATERIAL CHANGES AND COMMITMENTS, BETWEEN THE DATE OF BALANCE SHEET AND THE DATE OF REPORT:

17. MAINTENANCE OF COST RECORDS

18. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations.

19. VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Company has established a vigil mechanism for Directors and Employees to report their genuine concerns, details of which have been given in the Report on Corporate Governance.

20. FIXED DEPOSIT

Your Company has discontinued accepting fixed deposits since 2001-02. As such, as of 31^st March, 2019 there are no fixed deposits outstanding.

21. PARTICULARS OF EMPLOYEES

22. DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

Your Company has formulated âPrevention of Sexual Harassment of Women at Workplace Policyâ and the highlights are communicated to all Employees and also displayed across all its locations as well as on its intranet and the website.

During the reporting year, to create ongoing awareness, your Company has :

- Continued with a PoSH Awareness Module in its employee induction program.

- Seven workshops conducted in 2018-19 for 210 participants.

23. EMPLOYEES

Your Company has taken several initiatives for Human Resource Development and manpower retention. Manpower is classified under Frontend, Internal and Support functions for better Customer Reach and Support. Assessment of Values & Leadership Competencies, identifying training needs through the 70-20-10 format, Career Counseling and Management Development Programs are some of the initiatives adopted by your Company. Training programs are designed to enhance skills, knowledge and behaviour. Employees are motivated through empowerment and rewards for good performance. Adoption of 5S across the Company has led to a clean and healthy environment. The Company has a benchmark score on 17 of the 24 engagement drivers as per the last Employee Engagement Survey conducted by an external Independent Agency.

Your Company has 650 permanent employees on its rolls as on 31^st March, 2019.

24. CAUTIONARY STATEMENT

Statements in this Report, particularly those which relate to Management Discussion and Analysis, describing the Companyâs objectives, projections, estimates and expectations may constitute âforward looking statementsâ within the meaning of applicable laws and regulations. Actual results may differ materially from those either expressed or implied.

25. ACKNOWLEDGEMENT

The Directors wish to convey their appreciation to all your Companyâs Employees for their enormous personal efforts as well as their collective contribution to your Companyâs performance. The Directors would also like to thank the shareholders, customers, dealers, suppliers, bankers and all other stakeholders for their continued support and their confidence in its management.

For and on behalf of the

Board of Directors

sd/-

Rahul C. Kirloskar

Executive Chairman

Place : Pune DIN00007319

Date : 4^th May, 2019

Mar 31, 2018

DIRECTORS'' REPORT TO THE MEMBERS

The Directors have pleasure in presenting this Report with Audited Annual Accounts of the Company for the year ended 31^st March, 2018.

FINANCIAL RESULTS

First time adoption

Your Company has for first time adopted Indian Accounting Standards (IND AS) while preparing its Financial Statements for the financial year 2017-18 and accordingly corresponding previous yearâs figures were restated with a transition date as 1^st April, 2016. The Financial Statements are prepared in terms of the Companies (Indian Accounting Standards) Rules, 2015, as amended, and other accounting principles generally accepted in India.

The financial results for the year ended 31^st March, 2018 are summarized below:

Amount in Million

	2017-18	2016-17
Total Income	6227.75	5813.17
Profit before tax	726.81	714.40
Tax Expense (Current & Deferred tax)	227.38	176.60
Profit after tax	499.43	537.80
Other Comprehensive Income / (Loss)	38.27	258.06
Total Comprehensive Income for the year, net of tax	537.70	795.86
Transferred to General Reserve	324.71	510.81

FINANCIAL PERFORMANCE

Your Company achieved total revenue of Rs. 6,227.75 Million for the financial year 2017-18, against last year''s Rs. 5,813.17 Million an increase of 7.13%. Your company earned a net profit of Rs. 499.43 Million, against last year''s Rs. 537.80 Million which included income of Rs. 101.48 Million from sale of Investments.

SHARE CAPITAL

Pursuant to the Scheme of Arrangement and Amalgamation between Kirloskar RoadRailer Limited (the "Transferor Company Iâ), Pneumatic Holdings Limited (the "Transferor Company IIâ), Kirloskar Pneumatic Company Limited (the "Transferee Companyâ) and their respective shareholders (the ''''Scheme''''), 7,007,551 equity shares held by Pneumatic Holdings Limited in the Company got cancelled on account of cross holdings. Further, 7,007,551 equity shares of Rs. 10/- each were allotted as on 30^th May, 2017 to the shareholders of Pneumatic Holdings Limited, who were the shareholders on the record date i.e. 23^rd May, 2017 in the ratio of 53 fully paid equity shares of Rs. 10/- each of Kirloskar Pneumatic Company Limited for every 40 fully paid equity shares held by the shareholders in erstwhile Pneumatic Holdings Limited as on the record date. As a result thereof, there was no change in total paid-up share capital of the Company.

SCHEME OF ARRANGEMENT AND AMALGAMATION

In terms of the said Scheme, all fractional entitlements have been consolidated in aggregating to 5,821 equity shares which were allotted to the persons appointed as Trustees for this purpose. These 5,821 equity shares were sold in the market. The net sale proceeds thereof at the rate of Rs. 1,014/- per equity share in proportion to the fractional entitlement along with proportionate dividend at the rate of Rs. 10/- per equity share (received on 5,821 equity shares in August 2017) has been paid to the respective shareholders of erstwhile Pneumatic Holdings Limited who were the Shareholders as on the record date i.e. 23^rd May, 2017. This payment was made on 3^rd March, 2018.

JOINT VENTURE

During the year under review, a Joint Venture Company namely âKirloskar AECOM Private Limitedâ (hereinafter referred to as âKAPLâ) was incorporated on 10^th February, 2018 to carry on business of Air Quality Control Systems. This joint venture is with AECOM India Private Limited, a group company of AECOM, USA.

During the year under review, KAPL has not started any commercial operations.

During the year under review, the Company has paid for the expenses towards incorporation of KAPL and the same being reflected in its financial statement as due from KAPL.

Pursuant to the provisions of Section 2(41) of the Companies Act, 2013, the financial year of every company is 31^st March of every year. However, where a Company has been incorporated on or after the 1^st January of a year, the first financial year of that Company means the period ending on 31^st March of the following year and accordingly the Financial Statements of that Company shall be made up. Therefore, the first financial year of KAPL will end on 31^st March, 2019 and accordingly its first Financial Statements will be made up.

In view of the same, please refer note 47 as it appears in the Financial Statement of the Company.

DIVIDEND

The Board of Directors have recommended a dividend of Rs. 12 /- (120%) per equity share of Rs. 10/- each for the year ended 31^st March, 2018.

AWARDS

During the year under review, your company has been appreciated for ENCON efforts by :

- CII - 18^th National award for excellence in energy management.

- Kirloskar Group ENCON award

- 3^rd prize to Hadapsar plant in energy efficient unit - large plant category

- 3^rd prize to Saswad plant in energy efficient unit - medium plant category During the year under review, your Company has also received:

- Awards in the 31^st National Convention on Quality Concepts - NCQC 2017 organised by QCFI

- 3 Nos. "Excellence Award Trophyâ

- Awards in the 32^nd National Convention on Quality Concepts - CCQC 2017 organised by QCFI

- 1 No. "Gold Trophyâ

- 2 Nos. "Silver Trophyâ

- Awards in the 13^th Kaizen Competition - Maharashtra State Level 2017organised by CII

- 1 No. "Appreciation Awardâ

- CII HR Excellence Award

- âSignificant Achievement in HR Excellenceâ at the 8^th CII HR Excellence Award Confluence.

PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS

No Loans, Guarantees covered under the provisions of Section 186 of the Companies Act, 2013 are given / provided / made during the reporting year except expenditure incurred for formation of KAPL which are receivable from it.

During the reporting year, your Company has agreed to subscribe for 160,000/- (50%) equity shares of KAPL but amount has not been paid till 31^st March, 2018.

DIRECTORS

i. CHANGES IN COMPOSITION OF THE BOARD OF DIRECTORS

During the reporting year, Mr Krishnamurthi Venkataramanan appointed as an Independent Director in the last Annual General Meeting held on 27^th July, 2017.

Mr D R Swar, Director retires by rotation at the ensuing Annual General Meeting and being eligible offers himself for re-appointment.

ii. CHANGES IN KMP

During the year under review, there was no change in the Key Managerial Personnel.

iii. DECLARATION FROM INDEPENDENT DIRECTORS

Your Company has received necessary declarations from all its Independent Directors stating that they meet the criteria of independence as provided in Sub-section (6) of Section 149 of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

iv. BOARD EVALUATION

The annual evaluation framework for assessing the performance of Directors comprises of the following key areas:

a) Attendance for the meetings, participation and independence during the meetings.

b) Interaction with Management.

c) Role and accountability of the Board.

d) Knowledge and proficiency.

e) Strategic perspectives or inputs.

v. DIRECTORS APPOINTMENT AND REMUNERATION POLICY

The Board has on the recommendation of the Nomination and Remuneration Committee framed a ''Remuneration Policy'' for selection and appointment of Directors and for their remuneration. The Remuneration Policy is annexed as Annexure "1â. The same is avilable on the website of the company namely www.kirloskarkpcl.com

vi. NUMBER OF MEETINGS OF THE BOARD

vii. COMPOSITION OF AUDIT COMMITTEE

The composition of the Audit Committee forms part of the Report on Corporate Governance.

viii. DIRECTORSâ RESPONSIBILITY STATEMENT

To the best of their knowledge and belief and according to the information and explanation obtained by them, the Directors in terms of clause (c) of Sub-section (3) of Section 134 state that:

a) In the preparation of the annual accounts, the applicable Indian Accounting Standards (IND AS) have been followed and there have been no material departures;

b) Accounting policies as mentioned in the financial statements have been selected and applied consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at 31^st March, 2018 and of the profit of the company for the year ended on that date;

d) The annual accounts have been prepared on a going concern basis;

e) Proper internal financial controls have been laid down for the company and that such internal financial controls are adequate and are operating effectively; and

f) Proper systems to ensure compliance with the provisions of all applicable laws are in place and that such systems are adequate and operating effectively.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All Related Party Transactions have been placed before the Audit Committee for their approval and to the Board, as and when required.

The policy on Related Party Transactions as approved by the Board is uploaded on the Company''s website.

The disclosures as per Indian Accounting Standards (IND AS) for transactions with related parties are provided in the Financial Statement of the Company.

RISK MANAGEMENT

The Company has a Risk Management framework to identify, evaluate business risks and opportunities. To strengthen the risk management framework, Company has segment level risk committees and Corporate Risk Management Committee. This framework seeks to minimize adverse impact on the business objectives and enhance the Company''s competitive advantage.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

During the reporting year, Internal Financial Controls laid down by the Board were tested for adequacy & effectiveness and no reportable material weakness in the design or operations were observed. The Company has policies and procedures in place for ensuring proper and efficient conduct of its business, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records and timely preparation of reliable financial information. Statutory Auditors have also certified adequacy of internal financial controls system overfinancial reporting.

AUDITORS a) STATUTORY AUDITORS

The Auditors of the Company, M/s P G Bhagwat, Firm Registration No. 101118W, Chartered Accountants, Pune, were appointed for a period of five years in 41^st Annual General Meeting subject to ratification at the Annual General Meeting. The requisite certificate pursuant to Section 139(1) of the Companies Act, 2013 has been received by the Company from M/s P G Bhagwat, Chartered Accountants. Resolution seeking Members ratification for the appointment of M/s P G Bhagwat, Chartered Accountants, is included at Item No. 4 of the Notice convening the 43^rd Annual General Meeting.

b) COST AUDITORS

As required under the Companies Act, 2013, the remuneration payable to the cost auditor is required to be placed before the Members in a general meeting for their ratification. Accordingly, a resolution seeking Members'' ratification for the remuneration payable to M/s Sudhir Govind Jog, a proprietary firm of Cost Accountant for the year ended on 31^st March, 2019 is included at Item No. 5 of the Notice convening the 43^rd Annual General Meeting.

c) SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s SVD & Associates, a partnership firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit is annexed herewith as Annexure "2â.

SECRETARIAL STANADARDS

The Institute of Company Secretaries of India had revised Secretarial Standards on meetings of the Board of Directors (SS-1) and Secretarial Standards on General Meetings (SS-2) with effect from 1^st October, 2017. The Company is in compliance with the revised Secretarial Stantards.

CORPORATE GOVERNANCE

The Company endeavours to maximize the wealth of the shareholders by managing the affairs of the Company with pre-eminent level of accountability, transparency and integrity. A report on Corporate Governance including the

relevant Auditors'' Certificate regarding compliance with the conditions of Corporate Governance as stipulated in Regulation 34 (3) read with Part E of Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 along with Management Discussion and Analysis is annexed and forms part of the Annual Report.

EXTRACT OF ANNUAL RETURN

The extract of Annual Return as provided under Sub-section (3) of Section 92 of the Companies Act, 2013 is annexed as Annexure "3â.

CORPORATE SOCIAL INITIATIVES

As part of its initiatives under Corporate Social Responsibility (CSR), the Company has undertaken projects in the areas of Promoting Education, Health and Sanitation. These projects are largely in accordance with Schedule VII of the Companies Act, 2013.

Your Company has contributed an amount of Rs. 5 Million byway of donation to the Corpus Fund of Kirloskar Institute of Advanced Management and Studies for promoting education.

Your Company has provided preventive eye care to 18,079 school students from nearby 19 schools and junior colleges in the vicinity of Hadapsar Plant and Saswad Plant. Free spectacles were given for the needy thus improving vision of 1,857 students. Additionally, 786 teachers from 13 schools underwent preventive health check as a part of School Health Initiative project.

Sanitation, being a national agenda, your Company has taken initiative to create awareness about WaSH (water, sanitation and hygiene) among 18,034 school students from 28 nearby schools by deploying 156 employee volunteers and training these volunteers to implement various WaSH modules throughout the academic year.

To create awareness about HIV AIDS amongst different sections of the society your Companyâs DISHA project reached out to 37,112 members of the general community including secondary school and junior college students.

CSR Policy in brief:

The focus of CSR activities will be on Education, Environment and Health.

While devising projects, care should be taken to promote the education, health and sanitation, protect the environment and minimize adverse impact, if any, on the society at large.

The Company is committed to uphold the interests of all the stakeholders by implementing the various

guidelines like business excellence models.

Any income or surplus arising out of CSR activities undertaken by the Company will form part of the corpus earmarked for CSR activities.

Any surplus arising out of any of the CSR activities carried out by the Company will not be treated as part of the business profits of the Company.

The Annual Report on CSR activities is annexed herewith as Annexure "4â.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations.

VIGIL MECHANISM/WHISTLE BLOWER POLICY

The Company has established a vigil mechanism for Directors and Employees to report their genuine concerns, details of which have been given in the Report on Corporate Governance.

FIXED DEPOSIT

Your Company has discontinued accepting fixed deposits since 2001-02. As such, as of 31^st March, 2018 there are no fixed deposits outstanding.

PARTICULARS OF EMPLOYEES

Disclosures with respect to the remuneration of Directors and Employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 have been annexed as Annexure "6â to this Report.

In accordance with the provisions of Section 197(12) of the Companies Act, 2013 and Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names and other particulars of Employees are available at the Registered Office of the Company during working hours for a period of 21 days before the Annual General Meeting and shall be made available to any shareholder on request.

DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Internal Committee (IC) is formed as per the requirement of the law. IC meets every quarter and submits the minutes of meeting to the employer i.e. Managing Director. During the reporting year, five such meetings were conducted and two complaints were raised and disposed off.

During the reporting year, to create ongoing awareness, your Company has

- included a PoSH Awareness Module in its employee induction program.

- nine workshops were conducted in 2017-18 for 250 participants.

- e-learning Module for 85 participants.

EMPLOYEES

Your Company has taken several initiatives for Human Resource development and retention. Manpower is classified under Frontend, Internal and Support functions for better customer reach and support. Assessment of

Values & Leadership Competencies, identifying training needs through the 70-20-10 format, career counseling and Management Development Programs are some of the initiatives adopted by your Company. Training programmes are designed to enhance skills, knowledge and behaviour. Employees are motivated through empowerment and rewards for good performance. Adoption of 5S across the Company has led to a clean and healthy environment. The Company has a benchmark score on 17 out of the 24 engagement drivers.

Your Company has 761 permanent employees on its rolls as on 31^st March, 2018.

ACKNOWLEDGEMENT

The Directors wish to convey their appreciation to all your Company''s Employees for their enormous personal efforts as well as their collective contribution to your Company''s performance. The Directors would also like to thank the shareholders, customers, dealers, suppliers, bankers and all other stakeholders for their continued support and their confidence in its management.

For and on behalf of the Board of Directors

sd/-

Rahul C Kirloskar

Place : Pune Executive Chairman

Date : 26^th April, 2018 DIN 00007319

Mar 31, 2017

The Directors have pleasure in presenting this Report with Audited Annual Accounts of the Company for the year ended 31^st March, 2017.

FINANCIAL RESULTS

The financial results for the year ended 31^st March, 2017 are summarized below:

(Figures in Rs.)

	2016-17	2015-16
Gross Profit	870,540,208	707,344,638
Less:
Depreciation and Amortization	172,972,364	190,896,678
Provision for Taxation	170,589,423	152,659,839
Profit after tax	526,978,421	363,788,121
Surplus from previous year	185,046,058	199,396,763
Surplus from previous year of Pneumatic Holdings Ltd.	615,788,588	-
Surplus from previous year of Kirloskar RoadRailer Ltd.	(4,395,846)	-
Add / (Less)
Transferred to General Reserve	510,806,946	270,000,000
Interim Dividend Paid by the Company	-	89,910,366
Interim Dividend Paid to the Shareholders of Pneumatic Holdings Ltd.	39,665,385	-
Proposed Dividend	128,443,380	-
Tax on Proposed Dividend	8,074,939	18,228,460
Retained Earnings	764,869,951	185,046,058

FINANCIAL PERFORMANCE

Your Company achieved total revenue of Rs. 5,562.91 million for the financial year 2016-17, against last year''s Rs. 5,299.78 million an increase of 5%. Your company also earned a net profit of Rs. 526.98 million for the financial year 2016-17, against last year''s Rs. 363.79 million an increase of 45%.This is a result of improved sales, improved inventory turns, reduction in debtors and overall improvement in operating efficiency.

SCHEME OF ARRANGEMENT AND AMALGAMATION

The Board of Directors of your Company in its meeting held on 20^th October, 2016 approved the Scheme of Arrangement and Amalgamation between Kirloskar RoadRailer Limited (the âTransferor Company Iâ), Pneumatic Holdings Limited (the âTransferor Company IIâ), Kirloskar Pneumatic Company Limited (the âTransferee Companyâ) and their respective shareholders (the "Scheme").

The Company had filed an application with the Hon''ble National Company Law Tribunal - Mumbai Bench (the âNCLTâ) on 4^th January, 2017. NCLT directed the Company to hold a meeting of the Shareholders to approve the Scheme by its Order dated 18^th January, 2017.

The Shareholders of your Company in their meeting held on 7^th March, 2017 had approved the Scheme under Sections 230 to 232 of the Companies Act, 2013 and the rules issued there under and relevant sections of the Companies Act, 1956 to the extent applicable.

The Scheme was sanctioned by NCLT on 19^th April, 2017. The Transferor Companies and the Transferee Company have filed the certified true copy of the NCLT Order dated 19^th April, 2017 with the Registrar of Companies on 28^th April, 2017. Consequent upon the Scheme became effective from 28^th April, 2017 with effect from 1^st April, 2016, being the Appointed Date of the Scheme.

Upon the Scheme becoming effective, the investment of the Company held in Transferor Company I shall get cancelled. Accordingly, Kirloskar RoadRailer Limited stands dissolved without winding-up on the effective date and therefore it ceases to be Wholly Owned Subsidiary of your Company.

Upon the Scheme becoming effective, 70,07,551 equity shares held by Pneumatic Holdings Limited in the Company shall get cancelled on account of cross holdings and same number of equity shares will be allotted to the shareholders of Pneumatic Holdings Limited on the record date. There will be no change in total paid-up share capital of the Company pre and post Amalgamation after the allotment of said 70,07,551 equity shares.

Accordingly, Pneumatic Holdings Limited stands dissolved without winding-up on the effective date and therefore ceases to be Holding Company of your Company.

Your Company has given effect to the Scheme in the Accounts and accordingly the Assets and the Liabilities of Kirloskar RoadRailer Limited and Pneumatic Holdings Limited are transferred to and vested in the Company with effect from 1^st April, 2016, being the Appointed Date of the Scheme.

Income accruing and expenses incurred by Kirloskar RoadRailer Limited and Pneumatic Holdings Limited, during the period from 1^st April, 2016 to 31^st March, 2017, have been incorporated in the Financial Statements after eliminating inter-company transactions. The effects of these transactions are reflected in the Financial Statements.

DIVIDEND

The Board of Directors have recommended a dividend of Rs. 10/- (100%) per equity share of Rs. 10/- each for the year ended 31^st March, 2017.

Pursuant to the Scheme referred above, the dividend at the above rate shall also be payable on 7,007,551 shares to be allotted to the Shareholders of Pneumatic Holdings Limited, as on the date to be fixed for the payment of dividend.

FIXED DEPOSIT

Your Company had discontinued accepting fixed deposits since 2001-02. As such as of 31^st March, 2017 there are no fixed deposits outstanding.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

No Loans, Guarantees covered under the provisions of Section 186 of the Companies Act, 2013 are given / provided / made during the reporting year except an Inter Corporate Deposit of Rs. 15 million to Kirloskar RoadRailer Limited, Wholly Owned Subsidiary Company.

During the year under review, your Company had made an investment of Rs. 0.1 million by subscribing to 10,000 equity shares of Rs. 10/- each in S. L. Kirloskar CSR Foundation, a Section 8 company. Your Company has thereafter sold 200 equity shares. As on 31^st March, 2017, your Company holds 9,800 equity shares of S. L. Kirloskar CSR Foundation.

During the year under review, your Company had made an investment of Rs. 29.8 million in Kirloskar RoadRailer Limited, Wholly Owned Subsidiary Company by making payment of 1^st call of 14.9 million equity shares of Rs. 10/each partly paid-up of Rs. 5/- per equity share.

During the year under review, your Company has sold 1,65,000 (14.47%) equity shares of Kirloskar Chillers Private Limited. As a result of this, Kirloskar Chillers Private Limited ceases to be an associate company w.e.f. 29^th December, 2016.

COMMENTS ON AUDITORS'' REPORT

There are no qualifications, reservations or adverse remarks or disclaimers made by M/s P G Bhagwat & Co., Statutory Auditors in their Audit Report.

There are also no qualifications, reservations or adverse remarks in the Secretarial Audit Report of M/s SVD & Associates, Partnership firm of Company Secretaries.

ENERGY CONSERVATION

Every year your Company adopts the best available technology and enhances energy efficiency of its operations to reduce energy consumption. Your Company is continually improving its operations to become more energy efficient. It also works on minimizing waste generated and adopting 5R (Reduce, Reuse, Recycle, Refuse & Recover) practices to reduce the impact on environment.

Your Company celebrates Energy Conservation Week and Environment Day every year. Your Company also organizes various programmes on global warming, green house gas emissions (GHG emission), compressed air leakage, water conservation, e-waste recycling to create awareness amongst employees and society.

AWARDS

During the year under review, your Company has been appreciated for ENCON efforts by:

- Best ENCON project - Induction furnace utilization at Foundry.

- 3rd prize to Saswad Plant in energy efficient unit - small plant category.

- 3rd prize to Hadapsar Plant in energy efficient unit - large plant category.

During the year under review, your Company has also received:

- Gold Award Trophy in Quality Improvement Success Stories Competition organized by Quality Circle Forum India.

- Awards in the 30^th National Convention on Quality Concepts - NCQC 2016 organised by QCFI.

- 4 Nos. âPar Excellence Award Trophyâ.

- 3 Nos. âExcellence Award Trophyâ.

- Awards in the 31^st National Convention on Quality Concepts - CCQC 2016 organised by QCFI:

- Best of Best- Bajaj Rolling Trophyâ for Kaizen Presentation.

- 6 Nos. âGold Trophyâ in various categories of Kaizen Presentations.

- 1 No. âGold Trophyâ to Quality Circle team.

Further your Company is proud of the following awards:

- Mr Sadashib Padhee, Vice President - HR was awarded as the ''Most Influential HR Leader'' in India by World HRD Congress.

- Mr Arun Adivarekar, General Manager - Quality Assurance was also awarded as the ''50 Most Impactful Quality Professionals'' in India by World Quality Congress.

DIRECTORS

Mr A C Mukherji, Independent Director of the Company retired w.e.f. 23^rd July, 2016. He has had a long association with your Company since 1981. His valuable guidance on business matters has enriched the Company enormously. The Board places on record his sincere appreciation and gratitude for enormous contributions made by him.

Mr P S Jawadekar, Independent Director of the Company retired w.e.f. 23^rd July, 2016. He has been on your Company''s Board since 2002. His guidance on operations has helped the Company to a great extent. The Board places on record his sincere appreciation and gratitude for enormous contribution made by him.

Dr Ajay Dua was appointed as an Independent Director on the Board in the last Annual General Meeting held on 22^nd July, 2016.

Mr Aditya Kowshik was re-appointed as the Managing Director of the Company for a further period of 3 years with effect from 24^th October, 2016.

Mr Rahul C Kirloskar was re-appointed as the Executive Chairman of the Company for a further period of 5 years with effect from 23^rd January, 2017.

Mr Vikram S Kirloskar, Director retires by rotation at the ensuing Annual General Meeting and being eligible offers himself for re-appointment.

The Board of Directors have co-opted Mr Krishnamurthi Venkataramanan as an Additional Director on the Board with effect from 23^rd July, 2016. He ceases to be a Director at the ensuing Annual General Meeting and being eligible offers himself for appointment as an Independent Director for a period of 3 years. Details of the proposal for appointment of Mr Krishnamurthi Venkataramanan are mentioned in the Explanatory Statement under Section 102 of the Companies Act, 2013 of the Notice of the 42^nd Annual General Meeting.

The Company has received notice in writing proposing his candidature for the office of Director. The necessary resolution for his appointment is being placed before you.

Your Company has received necessary declarations from all its Independent Directors stating that they meet the criteria of independence as provided in Sub-section (6) of Section 149 of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Board Evaluation

The annual evaluation framework for assessing the performance of Directors comprises of the following key areas:

a) Attendance for the meetings, participation and independence during the meetings.

b) Interaction with Management.

c) Role and accountability of the Board.

d) Knowledge and proficiency.

e) Strategic perspectives or inputs.

Directors Appointment and Remuneration Policy

Number of Meetings of the Board

A calendar of meetings is prepared and circulated in advance to the Directors. During the year, five Board Meetings were convened and held, the details of which are given in the Corporate Governance Report. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Directors'' Responsibility Statement

To the best of their knowledge and belief and according to the information and explanation obtained by them, the Directors in terms of clause (c) of Sub-section (3) of Section 134 state that:

(a) In the preparation of the annual accounts, the applicable accounting standards have been followed and there have been no material departures;

(b) Accounting policies as mentioned in note 52 to the financial statements have been selected and applied consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at 31^st March, 2017 and of the profit of the company for the year ended on that date;

(c) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the company and for prevention and detection of fraud and other irregularities;

(d) The annual accounts have been prepared on a going concern basis;

(e) Proper internal financial controls have been laid down for the company and that such internal financial controls are adequate and are operating effectively; and

(f) Proper systems to ensure compliance with the provisions of all applicable laws are in place and that such systems are adequate and operating effectively.

AUDITORS

a. Statutory Auditors

The Auditors of the Company, M/s P G Bhagwat, Firm Registration No. 101118W, Chartered Accountants, Pune, were appointed for a period of five years in the last Annual General Meeting subject to ratification at the ensuing Annual General Meeting. The requisite certificate pursuant to Section 139(1) of the Companies Act, 2013 has been received by the Company from M/s P G Bhagwat, Chartered Accountants. Resolution seeking Members ratification for the appointment of M/s P G Bhagwat, Chartered Accountants, is included at Item No. 4 of the Notice convening the 42^nd Annual General Meeting.

b. Cost Auditors

As required under the Companies Act, 2013, the remuneration payable to the cost auditor is required to be placed before the Members in a general meeting for their ratification. Accordingly, a resolution seeking Members'' ratification for the remuneration payable to M/s Sudhir Govind Jog, a proprietary firm of Cost Accountant for the year ended on 31^st March, 2018 is included at Item No. 5 of the Notice convening the 42^nd Annual General Meeting.

c. Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s SVD & Associates, a partnership firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit is annexed herewith as Annexure â2â.

CORPORATE GOVERNANCE

The Company endeavors to maximize the wealth of the shareholders by managing the affairs of the Company with pre-eminent level of accountability, transparency and integrity. A report on Corporate Governance including the relevant Auditors'' Certificate regarding compliance with the conditions of Corporate Governance as stipulated in Regulation 34 (3) read with Part E of Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 along with Management Discussion and Analysis is annexed and forms part of the Annual Report.

EXTRACT OF ANNUAL RETURN

The extract of Annual Return as provided under Sub-section (3) of Section 92 of the Companies Act, 2013 is annexed as Annexure â3â.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All Related Party Transactions have been placed before the Audit Committee for their approval and to the Board, as and when required. In certain cases, prior omnibus approval of the Audit Committee is obtained on a yearly basis. The transactions entered into pursuant to the omnibus approval so granted are reviewed by the Audit Committee on a quarterly basis.

The policy on Related Party Transactions as approved by the Board is uploaded on the Company''s website.

The disclosures as per AS 18 for transactions with related parties are provided in the Financial Statements of the Company.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

During the year, Internal Financial controls laid down by the Board were tested for adequacy & effectiveness and no reportable material weakness in the design or operations were observed. The Company has policies and procedures in place for ensuring proper and efficient conduct of its business, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records and timely preparation of reliable financial information. Statutory Auditors have also certified adequacy of internal financial controls system over financial reporting.

RISK MANAGEMENT

The provisions related to the Risk Management Committee of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 are not applicable to the Company. However, the Company has a Corporate Risk Management Committee and Segment Level Risk Committees. The Company has a Risk Management framework to identify, evaluate business risks and opportunities. To strengthen the risk management framework, Company has segment level risk committees and Corporate Risk Management Committee. This framework seeks to minimize adverse impact on the business objectives and enhance the Company''s competitive advantage.

CORPORATE SOCIAL INITIATIVES

Sanitation, being a national agenda, your Company has taken initiative to create awareness about WaSH (water, sanitation and hygiene) among 18,629 school students from 27 nearby schools by deploying 143 employee volunteers and training these volunteers to implement various WaSH modules throughout the academic year.

Your Company has provided preventive health care to 15,576 school students from nearby 15 schools in the vicinity of Hadapsar Plant and Saswad Plant.

To create awareness about HIV AIDS amongst different sections of the society reaching 37,425 members of the general community including secondary school and junior college students.

Your Company has contributed an amount of Rs. 5.50 million by way of donation to the Corpus Fund of Kirloskar Institute of Advanced Management and Studies for promoting education.

CSR Policy in brief:

The focus of CSR activities will be on Education, Environment and Health.

While devising projects, care should be taken to promote the education, health and sanitation, protect the environment and minimize adverse impact, if any, on the society at large.

The Company is committed to uphold the interests of all the stakeholders by implementing the various guidelines like business excellence models.

The Company shall spend at least 2% (two percent) of the average net profits, calculated in accordance with the provisions of the Companies Act, 2013 and Rules there under, made by it in three immediately preceding financial years, in every financial year.

Any income or surplus arising out of CSR activities undertaken by the Company will form part of the corpus earmarked for CSR activities.

Any surplus arising out of any of the CSR activities carried out by the Company will not be treated as part of the business profits of the Company.

The Annual Report on CSR activities is annexed herewith as Annexure â4â.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations.

VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Company has established a vigil mechanism for Directors and employees to report their genuine concerns, details of which have been given in the Corporate Governance Report.

PARTICULARS OF EMPLOYEES

Disclosures with respect to the remuneration of Directors and Employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 have been annexed as Annexure â6â to this Report.

In accordance with the provisions of Section 197(12) of the Companies Act, 2013 and Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names and other particulars of employees are available at the Registered Office of the Company during working hours for a period of 21 days before the Annual General Meeting and shall be made available to any shareholder on request.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

Your Company has formulated ''Prevention of Sexual Harassment of Women at Workplace Policy'' and the highlights are communicated to all employees and also displayed across all its locations as well as on its intranet and the website. The ICC is formed as per the requirement of the law. ICC meets every quarter and submits the minutes of meeting to the employer i.e. Managing Director. During the reporting year, four such meetings were conducted.

To create ongoing awareness, your Company has included a PoSH Awareness Module in its employee induction program. Four such programs were conducted in 2016-17, making all newly inducted employees aware about PoSH Policy and ICC of the Company. An Undertaking has been taken from all these employees stating that they have understood the PoSH Policy of the Company and that they will comply with it.

On International Women''s Day (8th March) an awareness session about PoSH Policy and ICC was organized for all women employees of your Company. The program also included an interactive session with ICC and a learning session on Self Defence.

EMPLOYEES

Your Company has taken several initiatives for Human Resource development and retention. Manpower is classified Frontend, Internal and Support functions for better customer reach and support. Assessment of Values & Leadership Competencies, identifying training needs through the 70-20-10 format, career counselling and Management Development Programs are some of the initiatives adopted by your Company. Training programmes are designed to enhance skills, knowledge and behaviour. Employees are motivated through empowerment and rewards for good performance. Adoption of 5S across the Company has led to a clean and healthy environment. The Company has a benchmark score on 11 out of the 21 engagement drivers.

Your Company has 787 permanent employees on its rolls as on 31^st March, 2017.

ACKNOWLEDGEMENT

The Directors wish to convey their appreciation to all your Company''s employees for their enormous personal efforts as well as their collective contribution to your Company''s performance. The Directors would also like to thank the shareholders, customers, dealers, suppliers, bankers and all other stakeholders for their continued support and their confidence in its management.

For and on behalf of the Board of Directors

sd/-

Place : Pune Rahul C Kirloskar

Date : 9^th May, 2017 Executive Chairman

DIN 00007319

Mar 31, 2016

The Directors have pleasure in presenting this Report with Audited Annual Accounts of the Company for the year ended 31st March, 2016.

FINANCIAL RESULTS

The financial results for the year ended 31st March, 2016 are summarized below:

(Figures in Rs)

2015-16 2014-15

Gross Profit 707,344,638 473,218,544

Less:

Depreciation and Amortization 190,896,678 189,026,949

Provision for Taxation 152,659,839 58,439,009

Profit after tax 363,788,121 225,752,586

Surplus from previous year 199,396,763 195,809,253 Add / (Less)

Transferred to General Reserve 270,000,000 144,794,186

Interim Dividend Paid 89,910,366 -

Proposed Dividend - 64,221,690

Tax on Dividend 18,228,460 13,149,200

Retained Earnings 185,046,058 199,396,763

FINANCIAL PERFORMANCE

Your company achieved a total revenue of Rs. 5,299.78 million for the financial year 2015-16, against last year''s Rs. 4,601.42 million - an increase of 15%. Your company also earned a net profit of Rs. 363.79 million for the financial year 2015-16, against last year''s Rs. 225.75 million - an increase of 61%.This is a result of improved sales, improved inventory turns, reduction in debtors and overall improvement in operating efficiency.

The Government has been taking various steps to promote the manufacturing sector like ''Make in India'' programme etc. and though these measures have created a favourable market sentiment, it is our opinion that it would take some more time for changes to be visible at ground level. In the capital goods industry, we largely depend upon the revival of core sectors like Oil & Gas, Cement, Steel and Power etc. but there has been no significant investment yet in these sectors.

Considering this scenario, the Company is putting in more efforts in its international initiatives while focusing on improving the domestic market share.

DIVIDEND

The Board of Directors had declared an interim dividend of Rs. 7/- (70%) per Equity Share of Rs. 10/- each for F.Y. 2015-16 at its meeting held on 14th March, 2016 and the same has been paid to eligible members and/or beneficial owners. In lieu of this, Board does not recommend any further dividend by considering the interim dividend paid as final dividend.

FIXED DEPOSIT

The Company had discontinued accepting fixed deposits since 2001-02. As such as of 31st March, 2016 there are no fixed deposits outstanding.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

No Loans, Guarantees or Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given / provided / made during the reporting year.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY

There have been no material changes and commitments affecting the financial position of the Company, which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of this report.

COMMENTS ON AUDITORS'' REPORT

There are no qualifications, reservations or adverse remarks or disclaimers made by M/s P G Bhagwat & Co., Statutory Auditors in their Audit Report except a modified opinion in respect of application for approval to the Central Government for waiver of recovery of payment of excess remuneration paid to Executive Chairman, details of which are given below.

During the year, Company had made an application to Central Government (The Ministry of Corporate Affairs) seeking approval for the remuneration payable to the Executive Chairman due to inadequacy of profits for the financial year 2014-15. The Ministry of Corporate Affairs vide its letter dated 15th January, 2016 rejected the application on the ground that Company had paid remuneration exceeding 5% of net profits to the Executive Chairman during the financial years 2012-13 & 2013-14 without obtaining prior approval of the Central Government and further directed recovery of excess remuneration paid amounting to Rs. 20.04 million (Rs.13.10 million net of tax). Company was advised to make an application to the Central Government for seeking waiver of recovery of this amount and accordingly Company has made the requisite application to the Central Government. The said application is pending for approval and therefore Company has not recovered any amount nor accounted it as recoverable in the books of accounts as on 31st March, 2016. Your Company is also seeking approval of Members by way of postal ballot for the same.

There are also no qualifications, reservations or adverse remarks in the Secretarial Audit Report of M/s SVD & Associates, Partnership firm of Company Secretaries.

ENERGY CONSERVATION

Every year your Company adopts the best available technology and enhances energy efficiency of its operations to reduce energy consumption. Your Company is continually improving its operations to become more energy efficient. It also works on minimizing waste generated and adopting 5R (Reduce, Reuse, Recycle, Refuse & Recover) practices to reduce the impact on environment.

Your Company celebrates Energy Conservation Week and Environment Day every year. Your Company also organises various programmes on global warming, green house gas emissions (GHG emission), compressed air leakage, water conservation, e-waste recycling to create awareness amongst employees and society.

AWARDS

During the year under review, your Company has been appreciated for ENCON efforts by :

- 1st prize at 9th State Level EC Award to Hadapsar plant for financial year 2014-15 from MEDA (Maharashtra Energy Development Agency);

- National award by CII for Energy Efficient unit to Hadapsar plant; and

- Certificate of Merit to Saswad plant in National Energy Conservation Award 2015 competition by Government of India.

During the year under review, your Company has received:

- Gold Award Trophy in Quality Improvement Success Stories in Competition organized by Quality Circle Forum India.

- Awards in the 29th National Convention on Quality Concepts - NCQC2015 organised by QCFI.

- 2 Nos. "Par Excellence Award Trophy".

- 2 Nos. "Excellence Award Trophy".

- "Certificate of Merit" in recognition of its significant progress in Total Quality Management in Ravi Kirloskar Quality Prize for Business Excellence - 2014-15.

- "Supplier of EHS Excellence Award" received from GE Oil & Gas for the excellent and consistent performance in EHS practices for the last 4 years.

DIRECTORS

Dr Aditi Pant was appointed as an Independent Director on the Board in the last Annual General Meeting held on 29th July, 2015.

The Board of Directors have co-opted Dr Ajay Kumar Dua as an Additional Director on the Board with effect from 14th March, 2016. He ceases to be a Director at the ensuing Annual General Meeting and being eligible offers himself for appointment as an Independent Director for a period of 5 years. Details of the proposal for appointment of Dr Ajay Kumar Dua are mentioned in the Explanatory Statement under Section 102 of the Companies Act, 2013 of the Notice of the 41st Annual General Meeting.

The Company has received notice in writing proposing his candidature for the office of Director. The necessary resolution for his appointment is being placed before you.

Your Company has received necessary declarations from all its Independent Directors stating that they meet the criteria of independence as provided in Sub-section (6) of Section 149 of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Mr Rahul C Kirloskar, Executive Director retires by rotation at the ensuing Annual General Meeting and being eligible offers himself for re-appointment.

Mr Rahul C Kirloskar, Executive Chairman has been appointed as Whole Time Director designated as Executive Chairman upto 22nd January, 2017. He is further appointed as Whole Time Director designated as Executive Chairman for a period of 5 years with effect from 23rd January, 2017 subject to approval of Members in the ensuing Annual General Meeting. Details of the proposal for appointment of Mr Rahul C Kirloskar are mentioned in the Explanatory Statement under Section 102 of the Companies Act, 2013 of the Notice of the 41st Annual General Meeting.

Mr Aditya Kowshik, Managing Director has been appointed as Managing Director upto 23rd October, 2016. He is further appointed as Managing Director for a period of 3 years with effect from 24th October, 2016 subject to approval of Members in the ensuing Annual General Meeting. Details of the proposal for appointment of Mr Aditya Kowshik are mentioned in the Explanatory Statement under Section 102 of the Companies Act, 2013 of the Notice of the 41st Annual General Meeting.

Board Evaluation

The annual evaluation framework for assessing the performance of Directors comprises of the following key areas:

a) Attendance for the meetings, participation and independence during the meetings.

b) Interaction with Management.

c) Role and accountability of the Board.

d) Knowledge and proficiency.

e) Strategic perspectives or inputs.

The evaluation involves assessment by the Nomination and Remuneration Committee and Board of Directors. A member of the Nomination and Remuneration Committee and Board does not participate in the discussion of his / her evaluation.

Directors Appointment and Remuneration Policy

The Board has on the recommendation of the Nomination and Remuneration Committee framed a ''Remuneration Policy'' for selection and appointment of Directors and for their remuneration. The Remuneration Policy is annexed as Annexure "1".

Number of Meetings of the Board

A calendar of meetings is prepared and circulated in advance to the Directors. During the year, five Board Meetings were convened and held, the details of which are given in the Corporate Governance Report. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Directors'' Responsibility Statement

To the best of their knowledge and belief and according to the information and explanation obtained by them, the Directors in terms of clause (c) of Sub-section (3) of Section 134 state that:

(a) In the preparation of the annual accounts, the applicable accounting standards have been followed and there have been no material departures.

(b) Accounting policies as mentioned in notes to the financial statements have been selected and applied consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2016 and of the profit of the Company for the year ended on that date.

(c) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for prevention and detection of fraud and other irregularities.

(d) The annual accounts have been prepared on a going concern basis.

(e) Proper internal financial controls have been laid down for the Company and that such internal financial controls are adequate and are operating effectively.

(f) Proper systems to ensure compliance with the provisions of all applicable laws are in place and that such systems are adequate and operating effectively.

AUDITORS

a. Statutory Auditors

The Auditors of the Company, M/s P G Bhagwat, Firm Registration No. 101118W, Chartered Accountants, Pune, retire at the conclusion of the ensuing Annual General Meeting. As per Section 139 and other applicable provisions of the Companies Act, 2013 and rules made thereunder, M/s P G Bhagwat, Firm Registration No. 101118W, Chartered Accountants, Pune are eligible for re-appointment for a term of five years from the conclusion of 41st Annual General Meeting till the conclusion of 46th Annual General Meeting subject to ratification at every Annual General Meeting. The requisite certificate pursuant to Section 139(1) of the Companies Act, 2013 has been received by the Company from M/s P G Bhagwat, Chartered Accountants. Resolution seeking Members approval for re-appointment of M/s P G Bhagwat, Chartered Accountants, Pune, is included at Item No. 4 of the Notice convening the 41st Annual General Meeting.

b. Cost Auditors

The Board of Directors had, on the recommendation of the Audit Committee, appointed M/s Sudhir Govind Jog, a proprietary firm of Cost Accountant to audit the cost accounts of the Company for the financial year 2016-17 on a remuneration of Rs 5 Lacs.

As required under the Companies Act, 2013, the remuneration payable to the cost auditor is required to be placed before the Members in a general meeting for their ratification. Accordingly, a resolution seeking Members'' ratification for the remuneration payable to M/s Sudhir Govind Jog, a proprietary firm of Cost Accountant for the year ended on 31st March, 2017 is included at Item No. 5 of the Notice convening the 41st Annual General Meeting.

c. Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s SVD & Associates, a partnership firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit is annexed herewith as "Annexure 2".

CORPORATE GOVERNANCE

The Company endeavors to maximize the wealth of the shareholders by managing the affairs of the Company with a pre-eminent level of accountability, transparency and integrity. A report on Corporate Governance including the relevant Auditors'' Certificate regarding compliance with the conditions of Corporate Governance as stipulated in Regulation 34 (3) read with Part E of Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 alongwith Management Discussion and Analysis is annexed and forms part of the Annual Report.

EXTRACT OF ANNUAL RETURN

The extract of Annual Return as provided under Sub-section (3) of Section 92 of the Companies Act, 2013 is annexed as "Annexure 3".

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All related party transactions except the transactions as mentioned in form AOC 2, which were entered into during the financial year were on an arm''s length basis and in the ordinary course of business. The said form AOC 2 is annexed as "Annexure 4".

There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large.

The statement that the transactions are at arm''s length and in the ordinary course of business is supported by a certificate from the Managing Director. The Company has also obtained the certificate from a Chartered Accountant on periodical basis.

All Related Party Transactions have been placed before the Audit Committee for their approval and to the Board, as and when required. In certain cases prior omnibus approval of the Audit Committee is obtained on a yearly basis. The transactions entered into pursuant to the omnibus approval so granted are reviewed by the Audit Committee on a quarterly basis.

The policy on Related Party Transactions as approved by the Board is uploaded on the Company''s website.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an Internal Control System commensurate with the size, scale and complexity of its operations. The scope of the Internal Audit is decided by the Audit Committee and the Board. To maintain its objectivity and independence, the Board has appointed an external Auditor, which reports to the Audit Committee of the Board on a periodic basis.

The Internal Auditor monitors and evaluates the efficacy and adequacy of internal control systems in the Company, its compliance with operating systems, accounting procedures and policies for various functions of the Company. Based on the report of Internal Auditor, process owners undertake corrective action wherever required in their respective areas and thereby strengthen the controls further. Audit observations and actions taken thereof are presented to the Audit Committee of the Board.

During the year, Internal Financial controls laid down by the Board were tested for adequacy & effectiveness and no reportable material weakness in the design or operations were observed. The Company has policies and procedures in place for ensuring proper and efficient conduct of its business, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records and timely preparation of reliable financial information. Statutory Auditors have also certified adequacy of internal financial controls system over financial reporting.

RISK MANAGEMENT

The provisions related to the Risk Management Committee of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 are not applicable to the Company. However the Company has a Corporate Risk Management Committee and Segment Level Risk Committees. The Company has a Risk Management framework to identify, evaluate business risks and opportunities. This framework seeks to minimize adverse impact on the business objectives and enhance the Company''s competitive advantage. The risk framework defines the risk management approach across the enterprise at various levels. To strengthen the risk management framework, Company has formed segment level risk committees to identify, analyze and mitigate the potential risks. The segment level risk committees report to the Corporate Risk Management Committee. The Corporate Risk Management Committee reports to the Audit Committee and the Board.

SUBSIDIARY COMPANY

As on 31st March, 2016, the Company had one wholly owned subsidiary and an associate company.

Kirloskar RoadRailer Limited is a Wholly Owned Subsidiary of the Company. The Subsidiary Company is set up for providing RoadRailer Services. Your Company expects that the RoadRailer services will commence from the current financial year.

Kirloskar Chillers Private Limited is an Associate Company. The Company is engaged in manufacture of a wide range of chillers i.e. Centrifugal Screw and Reciprocating and their Spares and After Sales Service. During the year under review, the net revenue of Kirloskar Chillers Private Limited is Rs 822.24 million and profit after tax is Rs 75.45 million.

In accordance with Section 129(3) of the Companies Act, 2013, the Company has prepared a consolidated financial statement of the Company which includes its subsidiary and associate Company and forms part of the Annual Report. A statement containing salient features of the subsidiary and associate Company is also included in the Annual Report.

In accordance with third proviso of Section 136(1) of the Companies Act, 2013, the Annual Report of the Company containing therein its standalone and consolidated financial statements has been placed on the website of the Company namely www.kirloskarkpcl.com

CORPORATE SOCIAL INITIATIVES

As part of its initiatives under Corporate Social Responsibility (CSR), the Company has undertaken projects in the areas of Promoting Education, Health and Sanitation. These projects are largely in accordance with Schedule VII of the Companies Act, 2013.

Sanitation, being a national agenda, your Company has taken initiative to create awareness about WaSH (water, sanitation and hygiene) among 8000 school children from 17 nearby schools by deploying 110 employee volunteers and training these volunteers to implement various WaSH modules throughout the academic year.

Your Company has provided preventive health care to 15000 school children from nearby 12 schools (8 schools in the vicinity of Hadapsar Plant and 4 schools in the vicinity of Saswad Plant) by offering them eye check up. Refractive error was identified in about 750 students who were given free spectacles, thus significantly improving their vision.

To create awareness about HIV AIDS in the general community (approximately reaching out to about 3000 people) by way of campaigns conducted by training 20 GET (Graduate Engineer Trainee) volunteers. HIV Positive Boot Camp was conducted to induct and train these GET volunteers and in turn HIV AIDS awareness campaigns were conducted for 1000 members of the general community and 2000 students from 5 Junior Colleges.

Your Company has contributed an amount of Rs 7.50 million by way of donation to the Corpus Fund of KIAMS for education, health and sanitation.

CSR Policy in brief:

The focus of CSR activities will be on Education, Environment and Health.

While devising projects, care should be taken to promote the education, health and sanitation, protect the environment and minimize adverse impact, if any, on the society at large.

The Company is committed to uphold the interests of all the stakeholders by implementing the various guidelines like business excellence models.

The Company shall spend at least 2% (two percent) of the average net profits, calculated in accordance with the provisions of the Companies Act, 2013, and Rules thereunder, made by it in three immediately preceding financial years, in every financial year.

Any income or surplus arising out of CSR activities undertaken by the Company will form part of the corpus earmarked for CSR activities.

Any surplus arising out of any of the CSR activities carried out by the Company will not be treated as part of the business profits of the Company.

The Annual Report on CSR activities is annexed herewith as "Annexure 5".

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, is annexed herewith as "Annexure 6".

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations.

VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Company has established a vigil mechanism for Directors and employees to report their genuine concerns, details of which have been given in the Corporate Governance Report.

PARTICULARS OF EMPLOYEES

Disclosures with respect to the remuneration of Directors and Employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 have been annexed as Annexure 7 to this Report.

In accordance with the provisions of Section 197(12) of the Companies Act, 2013 and Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names and other particulars of employees are available at the Registered Office of the Company during working hours for a period of 21 days before the Annual General Meeting and shall be made available to any shareholder on request.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company is an equal opportunity employer and consciously strives to build work culture that promotes dignity of all employees. Awareness programmes were conducted across the company to sensitize the employees to uphold the dignity of their colleagues at their workplace, mainly with respect to prevention of sexual harassment.

Pursuant to Section 22 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 read with Rule 14 of the Rules issued thereunder, an Internal Committee constituted under the said Act has confirmed that no complaint / case has been filed / pending with the Company during the year.

EMPLOYEES

Your Company has taken several initiatives for Human Resource development and retention. Manpower planning by classifying them into Frontend, Internal and Support functions is under way. Competency mapping, identifying training needs through the 70-20-10 format, career counseling and Management Development Programs are some of the initiatives adopted by your Company. T raining programmes are designed to enhance skills, knowledge and behaviour. Employees are motivated through empowerment and rewards for good performance. Adoption of 5S across the Company has led to a clean and healthy environment. Though the Employee Engagement score has reduced slightly from 71% to 68%, the Company has a benchmark score on 11 out of the 21 engagement drivers.

Your Company has 817 permanent employees on its rolls as on 31st March, 2016.

ACKNOWLEDGEMENT

The Directors wish to convey their appreciation to all your Company''s employees for their enormous personal efforts as well as their collective contribution to your Company''s performance. The Directors would also like to thank the shareholders, customers, dealers, suppliers, bankers and all other stakeholders for their continued support and their confidence in its management.

For and on behalf of the Board of Directors

sd/-

Place : Pune Rahul C Kirloskar

Date : 27th April, 2016 Executive Chairman

DIN 00007319

Mar 31, 2015

THE MEMBERS

The Directors have pleasure in presenting this Report with Audited Annual Accounts of the Company for the year ended 31 March, 2015.

FINANCIAL RESULTS

The financial results for the year ended 31 March, 2015 are summarized below:

(Figures in Rs) 2014-15 2013-14

Gross Profit 473,218,544 746,791,697

Less:

Depreciation 189,026,949 132,140,425

Provision for Taxation 58,439,009 226,350,955

Profit after tax 225,752,586 388,300,317

Surplus from previous year 195,809,253 207,781,268

Add / (Less)

Transferred to General Reserve 144,794,186 250,000,000

Proposed Dividend 64,221,690 128,443,380

Tax on Proposed Dividend 13,149,200 21,828,952

Retained Earnings 199,396,763 195,809,253

Financial Performance

The year 2014-15 has been a very challenging year for your Company. As your Company is primarily a capital goods equipment manufacturer, lack of investments in major sectors like Oil & Gas, Power, Steel, Cement, Railways and Defence has impacted the revenues of your Company.

The drop in oil prices has forced all Oil & Gas companies to delay their projects which has had a direct impact on us. However, your Company has endeavoured to keep costs under control and this is reflected in its performance.

Net revenues from operations of the company were Rs 4409 million for the year 2014-15 as against Rs 5099 million for the previous year. Consequently, PBT declined to Rs 284 million from Rs 615 million.

DIVIDEND

The Board of Directors have recommended a dividend of Rs 5/- (50%) per equity share for the year ended 31 March, 2015. In the last year a dividend of Rs 10/- (100%) per equity share was paid.

FIXED DEPOSIT

The Company has stopped accepting fixed deposits since 2001-02. As such as of 31 March, 2015 there are no fixed deposits outstanding.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

No Loans, Guarantees covered under the provisions of Section 186 of the Companies Act, 2013 are given / provided during the reporting year.

During the year under review, your Company has made an investment of Rs 44.7 million in Kirloskar RoadRailer Limited, Wholly Owned Subsidiary Company by subscribing to its rights issue of 14.9 million equity shares of Rs. 10/- each partly paid-up of Rs 3/- per equity share.

Your Company has offered 0.1 million equity shares of Rs 10/- each at Rs 500/- per equity share in response to the Buyback offer made by Kirloskar Chillers Private Limited, Associate Company. As a result of this buyback, your Company now holds 0.39 million equity shares representing 34.21% in Kirloskar Chillers Private Limited.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY

There have been no material changes and commitments affecting the financial position of the Company, which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of this report.

COMMENTS ON AUDITORS' REPORT

There are no qualifications, reservations or adverse remarks or disclaimers made by M/s P G Bhagwat & Co, Statutory Auditors except a matter of emphasis in respect of approval of Central Government to payment of minimum remuneration to Executive Chairman in their Audit Report. Application, as required is being filed.

There are no qualifications, reservations or adverse remarks in the Secretarial Audit Report of M/s SVD & Associates, Partnership firm of Company Secretaries.

ENERGY CONSERVATION

Your Company is working to reduce the energy required and is continually improving operations to become more energy efficient. Every year your Company adopts best available technology and enhances energy efficiency of its operations. Your Company also works on minimizing waste generated and adopting 5R (Reduce, Reuse, Recycle, Refuse & Recover) practices to reduce the impact on environment. To create awareness amongst employees and society, your Company celebrates Energy Conservation Week, Environment day and Ozone day.

AWARDS

During the year under review, your Company has received:

- 2nd prize at 9th State Level EC Award for financial year 2012-13 from MEDA (Maharashtra Energy Development Agency).

- The Company has also received the following awards in the 28th National Convention on Quality Concepts - NCQC 2014 organised by QCFI:

- "Par Excellence Award Trophy" - 2 Nos.

- "Excellence Award Trophy" - 5 Nos.

- "Distinguished Award Trophy" - 1 No.

- "Meritorious Award Trophy" - 2 Nos.

- CII- EXIM Bank Award for "Significant Achievement on the Journey towards Business Excellence - 2014" DIRECTORS

Mr A C Mukherji, Mr P S Jawadekar, Mr G Krishna Rao, Mr Sunil Shah Singh and Late Mr J Y Tekawade were appointed as Independent Directors on the Board in the last Annual General Meeting held on 23 July, 2014.

The Board of Directors have co-opted Dr Aditi Pant as an Additional Director on the Board with effect from 24 July, 2014. She ceases to be a Director at the ensuing Annual General Meeting and being eligible offers herself for appointment as an Independent Director for a period 3 years. Details of the proposal for appointment of Dr Aditi Pant are mentioned in the Explanatory Statement under Section 102 of the Companies Act, 2013 of the Notice of the 40th Annual General Meeting.

The Company has received notice in writing proposing her candidature for the office of Director. The necessary resolution for her appointment is being placed before you.

Your Company has received necessary declarations from all its Independent Directors stating that they meet the criteria of independence as provided in Sub-section (6) of Section 149 of the Companies Act, 2013 and Clause 49 of the Listing Agreement.

Accordingly, Mr Atul C Kirloskar, Non-Executive Director retires by rotation at the ensuing Annual General Meeting and being eligible offers himself for re-appointment.

We deeply regret to inform that Mr J Y Tekawade, Independent Director of the Company, passed away on 4 November, 2014 at the age of 80. He was associated with your Company over a decade. His guidance in every aspect has helped the Company to a great extent. The Company remembered his pragmatic approach in tackling any given situation and his enormous contribution to the Board. Your Company places on record its profound grief and sense of sorrow on the sad demise of Mr J Y Tekawade.

Board Evaluation

The annual evaluation framework for assessing the performance of Directors comprises of the following key areas:

a) Attendance for the meetings, participation and independence during the meetings;

b) Interaction with Management;

c) Knowledge and proficiency;

d) Strategic perspectives or inputs

The evaluation involves assessment by the Nomination and Remuneration Committee and Board of Directors. A member of the Nomination and Remuneration Committee and Board does not participate in the discussion of his / her evaluation.

Directors Appointment and Remuneration Policy

The Board has on the recommendation of the Nomination and Remuneration Committee framed a 'Remuneration Policy' for selection and appointment of Directors and for their remuneration. The Remuneration Policy is annexed as "Annexure 1".

Number of Meetings of the Board

A calendar of meetings is prepared and circulated in advance to the Directors. During the year six Board Meetings were convened and held, the details of which are given in the Corporate Governance Report. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013.

Directors' Responsibility Statement

To the best of their knowledge and belief and according to the information and explanation obtained by them, the Directors in terms of clause (c) of Sub-section (3) of Section 134 state that:

(a) In the preparation of the annual accounts, the applicable accounting standards have been followed and there have been no material departures;

(b) Accounting policies as mentioned in note 50 to the financial statements have been selected and applied consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at 31 March, 2015 and of the profit of the company for the year ended on that date;

(c) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the company and for prevention and detection of fraud and other irregularities;

(d) The annual accounts have been prepared on a going concern basis;

(e) Proper internal financial controls have been laid down for the company and that such internal financial controls are adequate and are operating effectively; and

(f) Proper systems to ensure compliance with the provisions of all applicable laws are in place and that such systems are adequate and operating effectively.

AUDITORS

a. Statutory Auditors

The Auditors of the Company, M/s P G Bhagwat, Firm Registration No. 101118W, Chartered Accountants, were appointed for a period of two years in the last Annual General Meeting subject to ratification at the ensuing Annual General Meeting. The requisite certificate pursuant to Section 139 (1) of the Companies Act, 2013 has been received by the Company from M/s P G Bhagwat, Chartered Accountants. Resolution seeking Members ratification for the appointment of M/s P G Bhagwat, Chartered Accountants, is included at Item No. 4 of the Notice convening the Annual General Meeting.

b. Cost Auditors

The Board of Directors had, on the recommendation of the Audit Committee, appointed M/s S G Jog, a proprietary firm of Cost Accountant to audit the cost accounts of the Company for the financial year 2014-15 on a remuneration of Rs 5 Lacs. However pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Amendment Rules, 2014, the cost audit will be applicable to the Company for the financial year commencing on or after 1 April, 2015.

As required under the Companies Act, 2013, the remuneration payable to the cost auditor is required to be placed before the Members in a general meeting for their ratification. Accordingly, a resolution seeking Members' ratification for the remuneration payable to M/s S G Jog, a proprietary firm of Cost Accountant for the year ended on 31 March, 2016 is included at Item No. 5 of the Notice convening the Annual General Meeting.

c. Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and amendments and modifications thereof, the Company has appointed M/s SVD & Associates, a partnership firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit is annexed herewith as "Annexure 2".

CORPORATE GOVERNANCE

The Company endeavors to maximize the wealth of the shareholders by managing the affairs of the Company with a pre-eminent level of accountability, transparency and integrity. A report on Corporate Governance including the relevant Auditors' Certificate regarding compliance with the conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement with BSE Limited alongwith Management Discussion and Analysis is annexed and forms part of the Annual Report.

EXTRACT OF ANNUAL RETURN

The extract of Annual Return as provided under Sub-section (3) of Section 92 of the Companies Act, 2013 is annexed as "Annexure 3".

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All related party transactions which were entered into during the financial year were on an arm's length basis and in the ordinary course of business. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large.

The statement that the transactions are at arm's length and in the ordinary course of business is supported by a Certificate from the Managing Director. The Company has also obtained the certificate from a Chartered Accountant on periodical basis.

All Related Party Transactions are placed before the Audit Committee for their approval and to the Board, as and when required. In certain cases prior omnibus approval of the Audit Committee is obtained on a yearly basis. The transactions entered into pursuant to the omnibus approval so granted are reviewed by the Audit Committee on a quarterly basis.

The policy on Related Party Transactions as approved by the Board is uploaded on the Company's website. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an Internal Control System commensurate with the size, scale and complexity of its operations. The scope of the Internal Audit is decided by the Audit Committee and the Board. To maintain its objectivity and independence, the Board has appointed an external Auditor, which reports to the Audit Committee of the Board on a periodic basis.

The Internal Auditor monitors and evaluates the efficacy and adequacy of internal control systems in the Company, its compliance with operating systems, accounting procedures and policies for various functions of the Company. Based on the report of Internal Auditor, process owners undertake corrective action wherever required in their respective areas and thereby strengthen the controls further. Audit observations and actions taken thereof are presented to the Audit Committee of the Board.

RISK MANAGEMENT

The Company has a Risk Management framework to identify, evaluate business risks and opportunities. This framework seeks to minimize adverse impact on the business objectives and enhance the Company's competitive advantage. The risk framework defines the risk management approach across the enterprise at various levels. To strengthen the risk management framework, company has formed segment level risk committees to identify, analyze and mitigate the potential risks.

SUBSIDIARY COMPANY

As on 31 March, 2015, the Company had one wholly owned subsidiary and an associate company. There has been no change in the number of subsidiary and associate company or in the nature of their business, during the year under review.

Kirloskar RoadRailer Limited is a wholly owned subsidiary of the Company. The subsidiary company is set up for providing RoadRailer services. Your Company expects that the RoadRailer services will commence from the current financial year.

Kirloskar Chillers Private Limited is an associate company. The Company is engaged in manufacture of an entire range of chillers i.e. Centrifugal Screw and Reciprocating and its Spares and After Sales Service. During the year under review the net revenue of Kirloskar Chillers Private Limited is Rs 760 million and profit after tax is Rs 49.9 million. In accordance with Section 129(3) of the Companies Act, 2013, the Company has prepared a consolidated financial statement of the company which includes its subsidiary and associate company and forms part of the Annual Report. A

statement containing salient features of the subsidiary and associate company is also included in the Annual Report.

In accordance with third proviso of Section 136(1) of the Companies Act, 2013, the Annual Report of the Company, containing therein its standalone and consolidated financial statements has been placed on the website of the Company namely www.kirloskarkpcl.com.

CORPORATE SOCIAL INITIATIVES

As part of its initiatives under Corporate Social Responsibility (CSR), the Company has undertaken projects in the areas of Promoting Education, Health and Sanitation. These projects are largely in accordance with Schedule VII of the Companies Act, 2013.

Sanitation, being a national agenda, your Company has taken initiative to create awareness about WaSH (Water, Sanitation and Hygiene) among the school children from nearby schools by promoting employee volunteering and training these volunteers to implement various WaSH modules throughout the academic year.

Your Company has provided preventive health care to 15000 school children from nearby 12 schools (8 schools in the vicinity of Hadapsar Plant and 4 schools in the vicinity of Saswad Plant) by offering them annual health check up.

To create awareness about HIV AIDS in the general community (approximately reaching out to about 3000 people) by way of campaigns conducted by trained GET (Graduate Engineer Trainee) volunteers. HIV Positive Boot Camp was conducted to induct and train 15 GET volunteers and in turn HIV AIDS awareness campaigns were conducted for the general community on 1st December, 2014 (World AIDS Day), during GAWA (Global AIDS Week Action) and in the whole month that followed.

Your Company has contributed an amount of Rs 15 million by way of donation to the Corpus Fund of KIAMS for creating infrastructure facilities for imparting education.

CSR Policy in brief:

The focus of CSR activities will be on Education, Environment and Health.

While devising projects, care should be taken to promote the education, health and sanitation, protect the environment and minimize adverse impact if any on the society at large.

The Company is committed to uphold the interests of all the stakeholders by implementing the various guidelines like business excellence models.

The Company shall spend at least 2% (two percent) of the average net profits, calculated in accordance with the provisions of the Companies Act, 2013, and Rules thereunder, made by it in three immediately preceding financial years, in every financial year.

Any income or surplus arising out of CSR activities undertaken by the Company will form part of the corpus earmarked for CSR activities.

Any surplus arising out of any of the CSR activities carried out by the Company will not be treated as part of the business profits of the Company.

The Annual Report on CSR activities is annexed herewith as "Annexure 4".

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, is annexed herewith as "Annexure 5".

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations.

VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Company has established a vigil mechanism for Directors and employees to report their genuine concerns, details of which have been given in the Corporate Governance Report.

PARTICULARS OF EMPLOYEES

In accordance with the provisions of Section 197(12) of the Companies Act, 2013 and Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, the names and other particulars of employees are set out in the "Annexure 6" to the Directors' Report.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

Pursuant to Section 22 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 read with Rule 14 of the Rules issued thereunder, the Internal Committee constituted under the said Act has confirmed that no complaint / case has been filed / pending with the Company during the year.

EMPLOYEES

Your Company has taken several initiatives for Human Resource development and retention. Competency mapping, identifying training needs, career counseling and Management Development Programs are some of the initiatives adopted by your Company. Training programs are designed to enhance skills, knowledge and behaviour. Employees are motivated through empowerment and rewards for good performance. Adoption of 5S across the Company has led to a clean and healthy environment. All these measures have resulted in increased employee engagement.

Your Company has 876 permanent employees on its roll as on 31 March, 2015.

ACKNOWLEDGEMENT

The Directors wish to convey their appreciation to all your Company's employees for their enormous personal efforts as well as their collective contribution to your Company's performance. The Directors would also like to thank the shareholders, customers, dealers, suppliers, bankers and all the other stakeholders for their continued support and their confidence in its management.

For and on behalf of the Board of Directors sd/-

Place : Pune Rahul C Kirloskar Date : 7 May, 2015 Executive Chairman DIN 00007319

Mar 31, 2014

TO THE MEMBERS

The Directors have pleasure in presenting their Report along with the Audited Accounts for the year ended March 31, 2014.

FINANCIAL RESULTS

The Financial results for the year ended March 31, 2014 are summarised below:

(Figures in Rs)

2013-14 2012-13

Gross Profit 746,791,697 822,662,567

Less:

Depreciation 132,140,425 114,903,957

Provision for Taxation 226,350,955 236,782,304

Profit after tax 388,300,317 470,976,306

Surplus from previous year 207,781,268 217,131,761

Add / (Less)

Transferred to General Reserve 250,000,000 300,000,000

Proposed Dividend 128,443,380 154,132,056

Tax on Proposed Dividend 21,828,952 26,194,743

Retained Earnings 195,809,253 207,781,268

OPERATIONS

The Indian economic growth rate has slowed down for the past couple of years and recovery is still some time away. The complex world of global economics and its volatility have affected India''s growth also.

The manufacturing sector has been the worst affected and the capital goods market has been hit the hardest. High fiscal deficit, high inflation, a volatile currency and the political environment have all contributed to uncertainty in the economy which in turn has caused the Company''s revenue to drop for the year 2013-14.

The net revenue of your company for the year ended under review was Rs. 5,099 Million against Rs. 5,488 Million of last year. The revenue of the compression segment was Rs. 4,159 Million as against Rs. 4,484 Million in 2012-13.

The compression segment was affected mainly due to very low investments in the Oil and Gas sector. Capital expenditure for expansion/up-gradation of refineries was also very low and this affected our business of Refrigeration and Gas Compression Systems. The CNG business was affected due to various infrastructural and gas availability issues. Our thrust into the export business has resulted in your Company booking the first export order for a CNG system.

The revenue of the Transmission segment was Rs. 679 Million as against Rs. 1,005 Million in 2012-13. The Transmission segment was affected mainly due to stagnation of growth and high stock levels in the Indian Railways. The wind turbine market also went down substantially due to lack of clarity in Government policies.

During the year under review, your company has successfully completed the Emergency Brake Distance Test (EBD) of one Road Railer Rake which is a pre-requisite for the running of this train. Your Company is now awaiting the final certification from the concerned Railway authorities.

Cost reduction measures and the WoW (war on waste) initiative helped your company to generally maintain its profitability for the year under review despite a severe downturn in the economy.

ENERGY CONSERVATION

Within the Company there are continuous efforts to improve operational efficiencies and minimizing consumption of natural resources. Your Company actively makes efforts to increase awareness about the need to sustain the environment and constantly evaluates new initiatives that could reduce waste and emissions within the Company.

As a result of this even though there is a substantial rise in power tariff and oil prices, we have been able to contain our costs.

DIVIDEND

The Board of Directors have recommended a dividend of Rs. 10/- (100 %) per equity share for the year ended March 31, 2014. In the last year a dividend of Rs.12/- (120%) per equity share was paid.

FIXED DEPOSIT

As of March 31, 2014 there are no Fixed Deposits outstanding nor unclaimed.

PROSPECTS

Your Company believes that the economic potential of the country may remain subdued for this year too. With the new Government in place it is hoped that the year 2015-16 will see a boost in investments in sectors that your Company is involved in. The uncertain political climate has led to many projects in the Oil and Gas sector being postponed or dropped. This has impacted the revenue of the Compression segment in 2013-14. It is expected that some of these projects in the Oil and Gas sector will be cleared for implementation in 2014-15 which will help your Companies'' revenue from 2015-16 onwards. Our drive for exports of hydro carbon based refrigeration systems and gas compression systems has resulted in your Company receiving some export orders and we expect to take this initiative forward in this year too.

With the Government of India reintroducing generation based incentive and launching of a new initiative to double the production of renewable energy by 2017, (upto 55000 MW) opportunities in the Transmission division should grow in the year 2015-16.

After receipt of the EBD certificate from the Railway Authorities and after setting up the terminals near Delhi and Chennai, your Company has a plan to manufacture and sell one more Road Railer Rake this year.

DIRECTORS

Mr. Sanjay C. Kirloskar resigned from the Board of the Company as on April 23, 2014. Your Directors expressed deep sense of gratitude and wishes to place on record their appreciation of the valuable contribution made by him during his tenure.

As per provisions of the Section 149 and other applicable provisions of the Companies Act, 2013, your Directors are seeking appointment of Mr. A. C. Mukherji, Mr. P. S. Jawadekar, Mr. G. Krishna Rao, Mr. Sunil Shah Singh and Mr. J. Y. Tekawade as Independent Directors in the ensuing Annual General Meeting. Details of the proposal for appointment of Mr. A. C. Mukherji, Mr. P. S. Jawadekar, Mr. G. Krishna Rao, Mr. Sunil Shah Singh and Mr. J. Y. Tekawade are mentioned in the Explanatory Statement under Section 102 of the Companies Act, 2013 of the Notice of the 39th Annual General Meeting. The Company has received notice(s) in writing proposing them as candidature for the office of Director. The necessary resolutions for their appointment are being placed before you.

Accordingly, Mr. D. R. Swar retires by rotation at the ensuing Annual General Meeting and being eligible offers himself for re-appointment.

CORPORATE GOVERNANCE

Your Company conforms to the norms of Corporate Governance as envisaged in the Listing Agreement with the Bombay Stock Exchange Ltd. A separate report on Corporate Governance, along with Statutory Auditors'' Certificate on the Compliance, Management Discussions and Analysis, is attached and forms part of the Annual Report.

STATUTORY DISCLOSURES

1. Conservation of Energy, Technology Absorption and Foreign Exchange

The information required under Section 217 (1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, pertaining to Energy Conservation, Technology Absorption, Foreign Exchange Earnings and Outgo, is given in the Annexure I to this Report and forms part of this Report.

2. Particulars of Employees

Information in accordance with sub-section (2A) of Section 217 of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, is given in the Annexure to the Directors'' Report. However as per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report and the Accounts is being sent to the Members of your Company excluding the aforesaid information. Any Member interested in obtaining the said annexure may write to the Secretarial Department at the Registered Office of the Company.

3. Consolidated Financial Statements

Pursuant to Clause 32 and 50 of the Listing Agreement with Stock Exchanges, your Company has prepared Consolidated Financial Statements as per the Accounting Standards applicable to the Consolidated Financial Statements issued by The Institute of Chartered Accountants of India. Audited Consolidated Financial Statements along with the Auditors'' report is presented elsewhere in this annual report.

4. Subsidiary Company

Kirloskar RoadRailer Limited is a Subsidiary of the Company. The Subsidiary Company is set up for providing RoadRailer Services. Your Company expects that the RoadRailer services will commence from the current financial year.

In accordance with the general circular issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet, Profit and Loss Account and other documents of Kirloskar RoadRailer Limited are not being attached with the Balance Sheet of the Company. However the financial information of Kirloskar RoadRailer Limited is disclosed in the Annual Report in compliance with the said circular. The Company will make available the Annual Accounts of Kirloskar RoadRailer Limited and the related detailed information to any member of the Company who may be interested in obtaining the same.

5. Directors'' Responsibility Statement

The Directors confirm that :

i. In preparation of Annual Accounts, the applicable accounting standards have been followed.

ii. The Directors have selected such accounting policies and applied them consistently in order to show true and fair view of the state of affairs.

iii. The Directors have taken proper care in maintaining accounting records as per the provisions of the Companies Act, 1956, for safeguarding your Company''s Fixed Assets for preventing and detecting fraud and other irregularities.

iv. The Annual Accounts are prepared on the principle of going concern.

6. Cash Flow

A Cash Flow statement for the year ended March 31, 2014 is attached to the Balance Sheet.

7. Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

Pursuant to Section 22 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 read with Rule 14 of the Rules issued there under, the Internal Committee constituted under the said Act has confirmed that no complaint / case has been filed / pending with the Company during the year.

AUDITORS

The Auditors of the Company, M/s. P. G. Bhagwat, Firm Registration No. 101118W, Chartered Accountants, Pune, retire at the conclusion of ensuing Annual General Meeting. As per the Section 139 and other applicable provisions of the Companies Act, 2013 and the rules issued there under, M/s. P. G. Bhagwat, Firm Registration No. 101118W are eligible for re-appointment for a term of 2 (two) years subject to ratification by the Members at every Annual General Meeting. The requisite certificate pursuant to Section 139 (1) of the Companies Act, 2013 has been received by the Company.

EMPLOYEES

Your Company has adopted modern techniques for Human Resource development and retention. Competency mapping, identifying training needs, career counselling are some of the methods adopted by your Company. Training programs are designed to enhance skills and knowledge. Employees are motivated with empowerment and rewards for good performance. Adoption of 5S across the Company has led to a clean and healthy environment. All these measures have resulted in Industry best attrition rate. Your Company has 970 permanent employees on its roll as on March 31, 2014.

ACKNOWLEDGMENT

The Directors wish to convey their appreciation to all your Company''s employees for their enormous personal efforts as well as their collective contribution to your Company''s performance. The Directors would also like to thank the shareholders, customers, dealers, suppliers, bankers and all the other stakeholders for their continued support and their confidence in its management.

For and on behalf of the Board of Directors

Place : Pune RAHUL C. KIRLOSKAR

Date : May 27, 2014 Executive Chairman

Mar 31, 2013

The Directors have pleasure in presenting their Report along with the Audited Accounts for the year ended March 31,2013.

FINANCIAL RESULTS

The Financial results for the year ended March 31,2013 are summarised below:

(Figures in Rs.)

2012-13 2011-12

Gross Profit 822,662,567 1,005,288,670

Less: Depreciation 114,903,957 120,572,158

Provision for Taxation 236,782,304 265,571,187

Profit after tax 470,976,306 619,145,325

Surplus from previous year 217,131,761 177,122,565

Add/(Less)

Transferred to General Reserve 300,000,000 400,000,000

Proposed Dividend 154,132,056 154,132,056

Tax on Proposed Dividend 26,194,743 25,004,073

Retained Earnings 207,781,268 217,131,761

OPERATIONS

Uncertainty in the Indian economy contributed to a drop in your Company''s revenues in the year 2012-13. The market sentiment was affected due to rise in the foreign exchange rate, inflation and high interest rates. The rise in crude oil prices also contributed to this uncertainty in India.

The net revenue of your Company for the year ended review was 5,488 million against Rs.6,666 million of last year.

The revenue of the Compression Segment was Rs. 4,484 million as against Rs.5,781 million in 2011 -12.

The Compression Segment was affected mainly due to very low investments in the Oil and Gas Sector.

Capital expenditure for expansion/up-gradation of refineries was also very low and this affected our business of Refrigeration and Gas Compression Systems.

The CNG segment did not grow as anticipated due to various infrastructural and gas availability issues.

Revenue of the Transmission segment was Rs. 1,005 million as against Rs. 885 million of the last year.

Inspite of the manufacturing sector not growing in the last year, your Company has generally maintained its profitability in the year.

This was the result of the many cost reduction measures undertaken by your company. This included value engineering products, re-engineering of our processes, improving efficiencies and reducing throughput time.

Your Company launched a WoW (War on Waste) initiative last year and employees consciously contributed to eliminating/ reducing all kinds of waste.

ENERGY CONSERVATION

In spite of substantial rise in power tariff and Oil prices, we have been able to contain our costs due to various energy conservation projects that we undertook last year.

Our efforts in energy conservation were recognised by the Institute of Engineers Pune, Local Centre, who awarded us with DSK Energy Award for Outstanding Contribution in Energy Sector.

DIVIDEND

The Board of Directors have recommended a dividend of Rs. 12/- (120%) per equity share for the year ended March 31,2013. In the last year a similar dividend of Rs.12/- (120%) per equity share was paid.

FIXED DEPOSIT

As of March 31,2013 there are no Fixed Deposits outstanding nor unclaimed.

PROSPECTS

The manufacturing sector witnessed a decline in the last couple of years. There are indications that the business sentiment is improving and your Company is meticulously keeping track of the developments. While this will definitely help in order booking, it will help in your company''s revenues from 2014-15 onwards.

Revenues of the Transmission products have grown by 20% over the last year with a marked improvement in profitability. We expect this Division to maintain its focus on profitability this year too.

Your company has taken up exports of Hydrocarbon Refrigeration and Compression Systems as a key growth area and in this context, I am glad to inform you that your company has now been approved by many Oil & Gas Companies in the Middle-East and South-East Asia as a supplier of these systems. These will help in growing revenues in the coming years.

Our efforts to get ourselves approved in many more Oil & Gas Companies in these regions will continue in this year too and you should be able to see your Company expanding this products in the coming years.

During the year end review, your company has manufactured one RoadRailer Rake which has been inspected and cleared by RDSO and is now awaiting Emergency Brake Distance Test (EBD).

DIRECTORS

Mr. J. Y. Tekawade, Mr. P. S. Jawadekar, Mr. Rahul C. Kirloskar and Mr. Vikram S. Kirloskar retire by rotation at the ensuing Annual General Meeting and being eligible offer themselves for re-appointment.

CORPORATE GOVERNANCE

Your Company conforms to the norms of Corporate Governance as envisaged in the Listing Agreement with the Bombay Stock Exchange Ltd. A separate report on Corporate Governance, along with Statutory Auditors'' Certificate on the Compliance, Management Discussions and Analysis, is attached and forms part of the Annual Report.

STATUTORY DISCLOSURES

1. Conservation of Energy, Technology Absorption and Foreign Exchange

The information required under Section 217 (1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, pertaining to Energy Conservation, Technology Absorption, Foreign Exchange Earnings and Outgo, is given in the Annexure I to this Report and forms part of this Report.

2. Particulars of Employees

Information in accordance with sub-section (2A) of Section 217 of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, is given in the Annexure to the Directors'' Report. However as per the provisions of Section 219(1 )(b)(iv) of the Companies Act, 1956, the Report and the Accounts is being sent to the Members of your Company excluding the aforesaid information. Any Member interested in obtaining the said annexure may write to the Secretarial Department at the Registered Office of the Company.

3. Consolidated Financial Statements

Pursuant to Clause 32 and 50 of the Listing Agreement with Stock Exchanges, your Company has prepared Consolidated Financial Statements as per the Accounting Standards applicable to the Consolidated Financial Statements issued by The Institute of Chartered Accountants of India. Audited Consolidated Financial Statements along with the Auditors'' report is presented elsewhere in this annual report.

4. Subsidiary Company

Kirloskar RoadRailer Limited is Subsidiary of the Company.

In accordance with the general circular issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet, Profit and Loss Account and other documents of Kirloskar RoadRailer Limited are not being attached with the Balance Sheet of the Company. However the financial information of Kirloskar RoadRailer Limited is disclosed in the Annual Report in compliance with the said circular. The Company will make available the Annual Accounts of Kirloskar RoadRailer Limited and the related detailed information to any member of the Company who may be interested in obtaining the same.

5. Directors'' Responsibility Statement

The Directors confirm that :

i. In preparation of Annual Accounts, the applicable accounting standards have been followed.

ii. The Directors have selected such accounting policies and applied them consistently in order to show true and fair view of the state of affairs.

iii. The Directors have taken proper care in maintaining accounting records as per the provisions of the Companies Act, 1956, for safeguarding your Company''s Fixed Assets for preventing and detecting fraud and other irregularities.

iv. The Annual Accounts are prepared on the principle of going concern.

6. Cash Flow

ACash Flow statement for the year ended March 31,2013 is attached to the Balance Sheet.

AUDITORS

The Auditors of the Company, M/s. R G. Bhagwat, Firm Registration No. 101118W, Chartered Accountants, Pune, retire at the conclusion of ensuing Annual General Meeting and are eligible for re-appointment. The requisite certificate pursuant to Section 224(1 -B) of the Companies Act, 1956 has been received.

EMPLOYEES

Your Company follows unique methods towards human resource retention and development. The human skills development part is taken care through competency mapping and identifying training needs. Training programs are designed in such a way that it addresses knowledge and skill enhancement. Empowerment and rewarding good performances ensures motivation and healthy working environment.

Employee relations achieved an important milestone with smooth wage settlement agreement with Workers Union on December 25, 2012 for a period of 36 months with effect from January 1, 2013. Industrial relations continued to be cordial during the year.

Your Company has 1017 permanent employees on its roll as on March 31,2013.

ACKNOWLEDGMENT

The Directors wish to convey their appreciation to all your Company''s employees for their enormous personal efforts as well as their collective contribution to your Company''s performance. The Directors would also like to thank the shareholders, customers, dealers, suppliers, bankers and all the other stakeholders for their continued support and their confidence in its management.

Forand on behalf of the Board of Directors

Place: Pune RAHULC. KIRLOSKAR

Date: April 24,2013 Executive Chairman

Mar 31, 2012

The Directors have pleasure in presenting their Report along with the Audited Accounts for the year ended March 31,2012.

FINANCIAL RESULTS

The Financial results for the year ended March 31,2012 are summarised below:

(Figures in Rs.) 2011-12 2010-11

Gross Profit 1,005,288,670 771,741,899

Less:

Depreciation & Amortization Expenses 120,572,158 117,511,931

Provision for Taxation 265,571,187 215,102,416

Profit after tax 619,145,325 439,127,552

Surplus from previous year 177,122,565 167,131,142

Add/(Less)

Transferred to General Reserve 400,000,000 250,000,000

Proposed Dividend 154,132,056 154,132,056

Tax on Proposed Dividend 25,004,073 25,004,073

Retained Earnings 217,131,761 177,122,565

OPERATIONS

A net sale of Rs.6,666 Millions was achieved during the year as against Rs. 4,917 million in last year. This 36% increase in revenue growth over the previous year has also contributed to a Profit Before Tax growth of Rs. 231 Millions.

The revenue of Compression Segment grew by Rs. 1,428 Millions to Rs. 5,781 Millions and growth in all product segments and dominance in all are as continued.

As committed to you last year the revamp of Transmission Division Operations has resulted in a great increase from Rs. 565 Millions to Rs. 885 Millions and has become operationally profitable.

We successfully delivered our largest Centrifugal Compressor based Refrigeration System for the first Coal Gasification Plant in India.

Export grew from Rs. 129 Millions to Rs. 319 Millions over the previous year.

ENERGY CONSERVATION

We have received National level award for Excellence in Energy Management from CM on December 1,2011.

We have also received a State level award for Excellence in Energy Conservation and Management from Maharashtra Energy Development Agency on March 13,2012 forthe year 2008-09.

DIVIDEND

The Board of Directors have recommended a dividend of Rs. 121- (120%) per equity share for the year ended March 31,2012 as against Rs. 121- (120%) per equity share paid last year.

FIXED DEPOSIT

As on March 31,2012 there are no fixed deposits either outstanding or unclaimed.

PROSPECTS

The year 2011-12 tested the resilience of our business segment in the face of high interest rates and moderate demand slowdown. Despite challenges our revenues increased to 36 % from 9% (i.e. from Rs.4,917 million in 2010- 11 to Rs. 6,666 million in 2011 -12).

The optimism we had on the growth of the Indian Economy was tempered by the 2nd Quarter of the year. The Wind Mill market shrunk due to various factors.

Investment in the Oil and Gas, Power and other infrastructure projects slowed down significantly.

For the Current Financial year 2012-13, your Company has a cautious outlook on the economy considering recession in global economy the anticipated rise in Foreign Exchange rates, crude oil prices, inflationary pressures in the Indian economy and high interest rates.

Consequently, your Company is carrying a lower order board as compared to the previous year. However, the silver lining is that we have an unprecedentedly large enquiry level.

DIRECTORS

Mr. Sanjay C. Kirloskar, Mr. D. R. Swar and Mr. G. Krishna Rao retire by rotation at the ensuing Annual General Meeting and being eligible offer themselves for re-appointment.

The Board of Directors at their meeting held on January 23, 2012 appointed Mr. Atul C. Kirloskar as an Additional Director of the Company. Pursuant to Section 260 of the Companies Act, 1956, Mr. Atul C. Kirloskar ceases to be a Director at the ensuing Annual General Meeting. The Company has received notice in writing proposing his candidature for the office of Director. The necessary resolutions for their appointment are being placed before you.

The Board of Directors at their meeting held on January 23, 2012 appointed Mr. Rahul C. Kirloskar, Chairman as a Whole-Time Director and designated him as an Executive Chairman for a period of 5 years.

CORPORATE GOVERNANCE

Your Company conforms to the norms of Corporate Governance as envisaged in the Listing Agreement with the Bombay Stock Exchange Ltd. A separate report on Corporate Governance, along with Statutory Auditors' Certificate on the Compliance, Management Discussions and Analysis, is attached and forms part of the Annual Report.

STATUTORY DISCLOSURES

1. Conservation of Energy, Technology Absorption and Foreign Exchange

The information required under Section 217 (1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, pertaining to Energy Conservation, Technology Absorption, Foreign Exchange Earnings and Outgo, is given in the Annexure I to this Report and forms part of this Report.

2. Particulars of Employees

Information in accordance with sub-section (2A) of Section 217 of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, is given in the Annexure to the Directors' Report. However as per the provisions of Section 219(1 )(b)(iv) of the Companies Act, 1956, the Report and the Accounts is being sent to the Members of your Company excluding the aforesaid information. Any Member interested in obtaining the said annexure may write to the Secretarial Department at the Registered Office of the Company.

3. Subsidiary Company

During the year Kirloskar RoadRailer Limited has became Subsidiary of the Company. The activity of manufacturing facility of Road Railer are set up at Nashik and the actual production will be commencing from the current financial year.

In accordance with the general circular No. 2/2011 dated February 8, 2011 issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet, Profit and Loss Account and other documents of Kirloskar Road Railer Limited are not being attached with the Balance Sheet of the Company. However the financial information of Kirloskar Road Railer Limited is disclosed in the Annual Report in compliance with the said circular. The Company will make available the Annual Accounts of Kirloskar Road Railer Limited and the related detailed information to any member of the Company who may be interested in obtaining the same.

The consolidated financial statement prepared as per applicable provisions and duly audited by the statutory auditors, is presented elsewhere in this annual report.

4. Directors' Responsibility Statement

The Directors confirm that:

i. In preparation of Annual Accounts, the applicable accounting standards have been followed.

ii. The Directors have selected such accounting policies and applied them consistently in order to show true and fair view of the state of affairs.

iii. The Directors have taken proper care in maintaining accounting records as per the provisions of the Companies Act, 1956, for safeguarding your Company's Fixed Assets for preventing and detecting fraud and other irregularities.

iv. The Annual Accounts are prepared oh the principle of going concern.

5. Cash Flow

A Cash Flow statement for the year ended March 31,2012 is attached to the Balance Sheet.

AUDITORS

The Auditors of the Company, M/s. P. G. Bhagwat, Firm Registration No. 101118W, Chartered Accountants, Pune, retire at the conclusion of ensuing Annual General Meeting and are eligible for re-appointment. The requisite certificate pursuant to Section 224(1-B) of the Companies Act, 1956 has been received.

EMPLOYEES

Your Company follows unique methods towards human resource retention and development. The human skills development part is taken care of through competency mapping and identifying training needs. Training programs are designed in such a way that it addresses knowledge and skill enhancement. Empowerment and rewarding good performances ensures motivation and healthy working environment.

Industrial relations continued to be cordial during the year. Your Company has 1013 permanent employees on its roll as on March 31,2012.

ACKNOWLEDGMENT

The Directors wish to convey their appreciation to all your Company's employees for their enormous personal efforts as well as their collective contribution to your Company's performance. The Directors would also like to thank the employees, shareholders, customers, dealers, suppliers, bankers and all the other stakeholders for their continuous support and their confidence in its management.

For and on behalf of the Board of Directors

Place: Pune RAHUL C. KIRLOSKAR

Date: April 24,2012 Chairman

Mar 31, 2011

The Directors have pleasure in presenting their Report along with the Audited Accounts for the year ended March 31, 2011.

FINANCIAL RESULTS

The Financial results for the year ended March 31,2011 are summarised below:

(Figures in Rs.)

2010-11 2009-10

Gross Profit 764,290,093 755,788,674

Less:

Depreciation 113,345,266 73,507,753

Provision for Taxation 215,902,416 206,572,078

Profit after tax 435,042,411 475,708,843 Balance of Profit from previous year 167,131,142 168,404,348

Add/(Less)

Tax adjustments for earlier years 4,085,141 3,403,713

Expenses in respect of Previous Year - (66,670)

Transferred to General Reserve 250,000,000 300,000,000

Proposed Dividend 154,132,056 154,132,056

Tax on Proposed Dividend 25,004,073 26,187,036

Surplus carried to Balance Sheet 177,122,565 167,131,142

OPERATIONS

During the year under review the net revenue of your company was Rs. 4,917 million as against Rs. 4,533 million last year showing a growth of 9%.

The revenue of the Transmission Division dropped from Rs. 629 million to Rs. 565 million Your Company has taken appropriate action to revamp the Transmission Division and this is expected to be in place in the coming year.

In the year under review your Company laid emphasis on improving operating efficiency, cost containment and working capital management. These have resulted in improvement in the performance of the company and the Company was not required to avail any working capital funds through out the year.

ENERGY CONSERVATION

"The Institution of Engineers" awarded your company the First Prize for "Outstanding Contribution in Energy Sector". This is a state level award.

Your Company also bagged the "Best Innovative Project for 1 MW Wind Turbine Gear Box Testing".

DIVIDEND

The Board of Directors have recommended a dividend of Rs. 12/- (120%) per equity share for the year ended March 31,2011 as against Rs. 12/- (120%) per equity share paid last year.

FIXED DEPOSIT

As on March 31,2011 there are no fixed deposits either outstanding or unclaimed.

PROSPECTS

The Indian economy has maintained its high growth rate. This is expected to continue during the current year also.

In the traditional fields your Company operates in i.e. Air, Refrigeration & Transmission, growth will be in line with the economic growth of the Country. Consequently a sustainable growth is envisaged during the coming years in these segments.

Investment in the Oil & Gas Sector has helped your company grow. The company has made inroads into new areas in this field.

Your Company was contracted to supply API 617 based refrigeration system for the first ever coal gasification plant being set up in India and this plant will be commissioned during the coming year.

The revamp of the Transmission Division which the Company undertook last year under review has resulted in the company focusing on Railways, Marine and Wind Power. This is expected to show significant improvement in the performance of the Division during the coming financial year.

Your Company has entered into an agreement with Indian Railway on March 16, 2011 for haulage of Road Railer trains, including its pilot project between Delhi & Chennai. Your Company is expecting to commission its plant for manufacture of these Road Railers during the current year.

The Road Railer is a biomodal transport system which will carry white goods from one destination to other by road as well as rail using the same vehicle. For this purpose your Company has already obtained & developed necessary technology.

DIRECTORS

Mr. Rahul C. Kirloskar, Mr. Vikram S. Kirloskar & Mr. A. C. Mukherji retire by rotation at the ensuing Annual General Meeting and being eligible offer themselves for re-appointment.

The Board of Directors at their meeting held on January 19, 2011 appointed Mr. Sunil Shah Singh as an Additional Director of the Company. Pursuant to Section 260 of the Companies Act, 1956, Mr. Sunil Shah Singh ceases to be a Director at the ensuing Annual General Meeting. The Company has received notice in writing proposing his candidature for the office of Director. The necessary resolutions for their appointment are being placed before you.

CORPORATE GOVERNANCE

Your Company conforms to the norms of Corporate Governance as envisaged in the Listing Agreement with the Bombay Stock Exchange Ltd. A separate report on Corporate Governance, along with Statutory Auditors Certificate on the Compliance, Management Discussions and Analysis, is attached and forms part of the Annual Report.

STATUTORY DISCLOSURES

1. Conservation of Energy, Technology Absorption and Foreign Exchange

The information required under Section 217 (1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, pertaining to Energy Conservation, Technology Absorption, Foreign Exchange Earnings and Outgo, is given in the Annexure I to this Report and forms part of this Report.

2. Particulars of Employees

There were no employees of the category indicated under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended.

3. Directors Responsibility Statement

The Directors confirm that:

i. In preparation of Annual Accounts, the applicable accounting standards have been followed.

ii. The Directors have selected such accounting policies and applied them consistently in order to show true and fair view of the state of affairs.

iii. The Directors have taken proper care in maintaining accounting records as per the provisions of the Companies Act, 1956, for safeguarding your Companys Fixed Assets for preventing and detecting fraud and other irregularities.

iv. The Annual Accounts are prepared on the principle of going concern.

4. Cash Flow

A Cash Flow statement for the year ended March 31,2011 is attached to the Balance Sheet.

AUDITORS

The Company had received a Special Notice from a Member of the Company signifying its intention to propose the name of M/s. P. G. Bhagwat, Chartered Accountants, Pune, Firm Registration Number 101118W, as Statutory Auditors of the Company instead of M/s. Dalai & Shah, Chartered Accountants, Mumbai who are retiring at the ensuing Annual General Meeting.

Accordingly, the Board of Directors of the Company, pursuant to the recommendation of the Audit Committee, proposes the appointment of M/s. P. G. Bhagwat, Chartered Accountants, Pune as the Statutory Auditors of the Company.

M/s. P. G. Bhagwat has furnished a Certificate under Section 224(1B) of the Companies Act, 1956 that their proposed appointment, if made, will be in accordance with the said provision of the Companies Act, 1956. The Members of the Company may appoint the Statutory Auditors as per Annual General Meeting Notice attached separately.

EMPLOYEES

Your Company follows unique methods towards human resource retention and development. The human skills development part is taken care of through competency mapping and identifying training needs. Training programs are designed in such a way that it addresses knowledge and skill enhancement. Empowerment and rewarding good performances ensures motivation and healthy working environment.

Industrial relations continued to be cordial during the year. Your Company has 985 permanent employees on its roll as on March 31,2011.

ACKNOWLEDGEMENT

The Directors wish to convey their appreciation to all your Companys employees for their enormous personal efforts as well as their collective contribution to your Companys performance. The Directors would also like to thank the employees, shareholders, customers, dealers, suppliers, bankers and all the other stakeholders for their continuous support and their confidence in its management.

For and on behalf of the Board of Directors

RAHUL C. KIRLOSKAR Chairman

Place: Pune Date : May 17,2011

Mar 31, 2010

The Directors have pleasure in presenting their Report along with the Audited Accounts for the year ended March 31,2010.

FINANCIAL RESULTS

The Financial results for the year ended March 31, 2010 are summarised below:

(Figures in Rs.)

2009-10 2008-09

Gross Profit 755,788,674 678,916,523 Less:

Depreciation 73,507,753 52,795,946

Provision for Taxation 206,572,078 208,610,048

Fringe Benefit Tax - 9,000,000

Profit after tax 475,708,843 408,510,529

Balance of Profit from previous year 168,404,348 151,504,514 Add / (Less)

Tax adjustments for earlier years 3,403,713 8,688,402

Expenses in respect of Previous Year (66,670) (26,765)

Transferred to General Reserve 300,000,000 250,000,000

Proposed Dividend 154,132,056 128,443,380

Tax on Proposed Dividend 26,187,036 21,828,952

Surplus carried to Balance Sheet 167,131,142 168,404,348

OPERATIONS

The Global Economic Crisis witnessed in the later part of the last year impacted the executable order board for the first quarter of the year 2009-10. The corresponding sales therefore in the first quarter were lower by Rs.550 million and this shortfall could not be recouped through out the year. Thus your Company could register sales of Rs.4533 million during the year under report as against Rs.5185 million during 2008-09.

However, various measures undertaken to strengthen operations, costs reduction to improve bottom line have resulted in improvement in profit after tax from Rs.408 million of the previous year to Rs.475 million in the year 2009-10.

ENERGY CONSERVATION

Kirloskar Pneumatic, Hadapsar and Saswad Plant jointly participated in State & National level "Energy Management & Conservation Competition" organized by MEDA ( Maharashtra Energy Development Agency) and Cll (Confederation of Indian Industries) and bagged third prize &" Energy Efficient Unit Award" respectively.

Kirloskar Pneumatic, Hadapsar Plant bagged the "Third Prize" in Kirloskar Group Energy Conservation Competition, which was held among the Kirloskar Group Companies

DIVIDEND

The Board of Directors have recommended a dividend of Rs. 121- per Equity Share for the year ended March 31,2010 as against Rs. 10/- per Equity Share paid last year.

FIXED DEPOSIT

As on 31st March, 2010 there are no fixed deposits either outstanding or unclaimed.

PROSPECTS

The Gas Compression business is growing and your company is prepared to meet this challenge.

As a preferred supplier for Refrigeration & AC Packages yourcompany has bagged many prestigious orders during the year and has been selected for many more in the coming years.

During the year, 1 MW range wind turbine gearbox was successfully developed and we expect to commence serial production.

DIRECTORS

Mr. Sanjay C. Kirloskar expressed his inability to continue as the Chairman of the Company w.e.f February 24, 2010 due to other pre-occupations, but continues to act as the Director of the Company.

He was elected as the Chairman of the Company on July 6, 1999 and continued to act as Chairman of the Company over a decade.

The Board places on record its appreciation of the rich and varied experience, advise, counsel and guidance received during his tenure as the Chairman of the Company.

The Board unanimously elected Mr. Rahul C. Kirloskar as the Chairman of the Company w.e.f. March 9,2010.

Mr. J Y Tekawade and Mr P S Jawadekar retire by rotation at the ensuing Annual General Meeting and being eligible offer themselves for re-appointment.

CORPORATE GOVERNANCE

The Company conforms to the norms of Corporate Governance as envisaged in the Listing Agreement with the Bombay Stock Exchange Ltd. A separate report on Corporate Governance, along with Statutory Auditors Certificate on the Compliance, Management Discussions and Analysis, is attached and forms part of the Annual Report.

STATUTORY DISCLOSURES

1. Conservation of Energy, Technology Absorption and Foreign Exchange

The information required under Section 217 (1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, pertaining to Energy Conservation, Technology Absorption, Foreign Exchange Earnings and Outgo, is given in the Annexure I to this Report and forms part of this Report.

2. Subsidiary Company

During the year Khosla Indair Limited a subsidiary of the company, ceased to be the subsidiary of the company.

3. Particulars of Employees

Information in accordance with sub-section (2A) of Section 217 of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, is given in the Annexure to the Directors Report. However as per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report and the Accounts is being sent to the Members of your Company excluding the aforesaid information. Any Member interested in obtaining the said annexure may write to the Secretarial Department at the Registered Office of the Company.

4. Directors Responsibility Statement

The Directors confirm that:

i. In preparation of Annual Accounts, the applicable accounting standards have been followed.

ii. The Directors have selected such accounting policies and applied them consistently in order to show true and fair view of the state of affairs.

iii. The Directors have taken proper care in maintaining accounting records as per the provisions of the Companies Act, 1956, for safeguarding Companys Fixed Assets for preventing and detecting fraud and other irregularities.

iv. The Annual Accounts are prepared on the principle of going concern.

5. Cash Flow

A Cash Flow statement for the year ended March 31,2010 is attached to the Balance Sheet.

AUDITORS

The Auditors of the Company, M/s. Dalai & Shah, Firm Registration No. 102021W, Chartered Accountants, Mumbai, retire at the conclusion of ensuing Annual General Meeting and are eligible for re-appointment. The requisite certificate pursuant to Section 224(1-B) of the Companies Act, 1956 has been received.

EMPLOYEES

The Company follows pragmatic methods towards human resource retention and development. The human skill development part is taken care of through training programs. The training programs are designed in a systematic manner after identifying an individuals training needs. Cutting across the organizational hierarchy, training sessions are held for promoting team spirit and for addressing training needs. The motivation part is taken care of through empowerment and ensuring healthy working environment. The dual remuneration system assured as well as performance related; promotes talent within the Company. The Company endeavours to ensure that its different functions are adequately manned.

Employee relations achieved an important milestone with peaceful wage settlement signed with Workers Union on March 8,2010 for a period of 36 months effective from 1st January, 2010.

Industrial relations continued to be cordial during the year.

The Company had 985 permanent employees on its roll as on 31s" March, 2010.

ACKNOWLEDGEMENT

The Directors wish to convey their appreciation to all of the Companys employees for their efforts as well as their collective contribution to the Companys performance. The Directors would also like to thank the employees union, shareholders, customers, dealers, suppliers, bankers and all other business associates for the continuous support given by them to the Company and their confidence in its management.

For and on behalf of the Board of Directors

Place: Pune RAHUL C. KIRLOSKAR

Date : April 28, 2010 Chairman

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